Registration No. 333-52689
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
A. BMA Variable Life Account A
(Exact Name of Trust)
B. Business Men's Assurance Company of America
(Name of Depositor)
C. BMA Tower, P.O. Box 412879
Kansas City, MO 84141
(Complete address of depositor's principal executive offices)
D. Name and complete address of agent for service:
David A. Gates
Business Men's Assurance Company of America
700 Karnes Blvd.
Kansas City, Missouri 64108
(800) 423-9398
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
E. Flexible Premium Adjustable Variable Life Insurance Policies (Title and
amount of securities being registered)
F. Proposed maximum aggregate offering price to the public of the securities
being registered:
Continuous offering
G. Amount of Filing Fee: Not Applicable
H. Approximate date of proposed public offering:
As soon as practicable after the effective date of this filing.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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EXPLANATORY NOTE
This Registration Statement contains 43 portfolios of the various underlying
investment options. Two versions (Version A and Version B) of the Prospectus
will be created from this Registration Statement. The only differences between
the two versions are the underlying investment options and the illustrations of
policy values. One version will contain 17 portfolios (Version A) and the other
version will contain 43 portfolios (Version B). The distribution system for each
version of the Prospectus will be different. There are Co-Principal Underwriters
of the Policy; each of whom will distribute a different version of the
Prospectus. The Prospectus contained in this Registration Statement contains two
sets of illustrations - one for Version A of the Prospectus and the other for
Version B. The Prospectuses will be filed with the Commission pursuant to Rule
497 under the Securities Act of 1933. The Registrant undertakes to update this
Explanatory Note, as needed, each time a Post-Effective Amendment is filed.
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CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
N-8B-2 Item Caption in Prospectus
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1 The Variable Insurance Policy
2 Other Information; The Company
3 Not Applicable
4 Other Information
5 The Separate Account
6(a) Not Applicable
(b) Not Applicable
7 Not Applicable
8 Not Applicable
9 Legal Proceedings
10 Purchases
11 Investment Options
12 Investment Options
13 Expenses
14 Purchases
15 Purchases
16 Investment Options
17 Access to Your Money
18 Access to Your Money
19 Reports to Owners
20 Not Applicable
21 Access to Your Money
22 Not Applicable
23 Not Applicable
24 Not Applicable
25 The Company
26 Expenses
27 The Company
28 The Company
29 The Company
30 The Company
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 BMA; Other Information
36 Not Applicable
37 Not Applicable
38 Other Information
39 Other Information
40 Not Applicable
41 Not Applicable
42 Not Applicable
43 Not Applicable
44 Purchases
45 Other Information
46 Access to Your Money
47 Not Applicable
48 Not Applicable
49 Not Applicable
50 Not Applicable
51 The Company; Purchases
52 Investment Options
53 The Separate Account
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
ISSUED BY
BMA VARIABLE LIFE ACCOUNT A
AND
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
This Prospectus describes the Flexible Premium Adjustable Variable Life
Insurance Policy (Policy) offered by Business Men's Assurance Company of America
(BMA).
The Policy has been designed to be used to create or conserve one's estate,
retirement planning and other insurance needs of individuals and businesses.
The Policy has 44 investment choices - A Fixed Account and 43 Investment Options
listed below. The 43 Investment Options are part of Investors Mark Series Fund,
Inc.; Berger Institutional Products Trust; Conseco Series Trust; The Alger
American Fund; American Century Variable Portfolios, Inc.; The Dreyfus Socially
Responsible Growth Fund, Inc.; Dreyfus Stock Index Fund; Dreyfus Variable
Investment Fund; Federated Insurance Series; INVESCO Variable Investment Funds,
Inc.; Lazard Retirement Series, Inc.; Neuberger & Berman Advisers Management
Trust; Strong Opportunity Fund II, Inc.; Strong Variable Insurance Funds, Inc.;
and Van Eck Worldwide Insurance Trust. When You buy a Policy, to the extent You
have selected the Investment Options, You bear the complete investment risk.
Your Accumulation Value and, under certain circumstances, the Death Benefit
under the Policy may increase or decrease or the duration of the Policy may vary
depending on the investment experience of the Investment Option(s) You select.
You can put Your money in the Fixed Account and/or any of the following
Investment Options:
INVESTORS MARK SERIES FUND, INC.
MANAGED BY STANDISH, AYER & WOOD, INC.
Intermediate Fixed Income
Mid Cap Equity
Money Market
MANAGED BY STANDISH INTERNATIONAL MANAGEMENT COMPANY, L.P.
Global Fixed Income
MANAGED BY STEIN ROE & FARNHAM, INCORPORATED
Small Cap Equity
Large Cap Growth
MANAGED BY DAVID L. BABSON & CO. INC.
Large Cap Value
MANAGED BY LORD, ABBETT & CO.
Growth & Income
MANAGED BY KORNITZER CAPITAL MANAGEMENT, INC.
Balanced
BERGER INSTITUTIONAL PRODUCTS TRUST
MANAGED BY BERGER ASSOCIATES
Berger IPT--100
Berger IPT--Growth and Income
Berger IPT--Small Company Growth
MANAGED BY BBOI WORLDWIDE LLC
Berger/BIAM IPT - International
CONSECO SERIES TRUST
MANAGED BY CONSECO CAPITAL MANAGEMENT, INC.
Asset Allocation
Common Stock
Corporate Bond
Government Securities
THE ALGER AMERICAN FUND
MANAGED BY FRED ALGER MANAGEMENT, INC.
Alger American Growth
Alger American Leveraged AllCap
Alger American MidCap Growth
Alger American Small Capitalization
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
MANAGED BY AMERICAN CENTURY INVESTMENT
MANAGEMENT, INC.
VP Income & Growth
VP International
VP Value
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
MANAGED BY THE DREYFUS CORPORATION
DREYFUS STOCK INDEX FUND
MANAGED BY THE DREYFUS CORPORATION
DREYFUS VARIABLE INVESTMENT FUND
MANAGED BY THE DREYFUS CORPORATION
Disciplined Stock
International Value
FEDERATED INSURANCE SERIES
MANAGED BY FEDERATED ADVISERS
Federated High Income Bond II
Federated International Equity II
Federated Utility II
INVESCO VARIABLE INVESTMENT FUNDS, INC.
MANAGED BY INVESCO FUNDS GROUP, INC.
INVESCO VIF - High Yield
INVESCO VIF - Industrial Income
LAZARD RETIREMENT SERIES, INC.
MANAGED BY LAZARD ASSET MANAGEMENT
Lazard Retirement Equity
Lazard Retirement Small Cap
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
MANAGED BY NEUBERGER & BERMAN MANAGEMENT INCORPORATED
Limited Maturity Bond
Partners
STRONG OPPORTUNITY FUND II, INC.
MANAGED BY STRONG CAPITAL MANAGEMENT, INC.
Opportunity Fund II
STRONG VARIABLE INSURANCE FUNDS, INC.
MANAGED BY STRONG CAPITAL MANAGEMENT, INC.
Growth Fund II
VAN ECK WORLDWIDE INSURANCE TRUST
MANAGED BY VAN ECK ASSOCIATES CORPORATION
Worldwide Bond
Worldwide Emerging Markets
Worldwide Hard Assets
Worldwide Real Estate
Please read this Prospectus before investing and keep it on file for future
reference. It contains important information about the BMA Flexible Premium
Adjustable Variable Life Insurance Policy. The Securities and Exchange
Commission maintains a Web site (http://www.sec.gov) that contains information
regarding registrants that file electronically with the Commission.
THE POLICY DESCRIBED HEREIN IS NOT A DEPOSIT OF, OR GUARANTEED BY ANY BANK, NOR
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY, AND IS SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITY COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATIONS TO THE CONTRARY IS A CRIMINAL OFFENSE.
DATE:
TABLE OF CONTENTS
DEFINITIONS..........................................................5
SUMMARY ............................................................8
1. THE VARIABLE LIFE INSURANCE POLICY......................8
2. PURCHASES...............................................8
3. INVESTMENT CHOICES......................................9
4. EXPENSES................................................9
5. DEATH BENEFIT..........................................10
6. TAXES..................................................11
7. ACCESS TO YOUR MONEY...................................11
8. OTHER INFORMATION......................................11
9. INQUIRIES..............................................13
PART I ...........................................................14
1. THE VARIABLE LIFE INSURANCE POLICY.....................14
2. PURCHASES..............................................14
PREMIUMS .........................................14
WAIVER OF PLANNED PREMIUMS........................15
APPLICATION FOR A POLICY..........................15
ISSUE AGES........................................15
APPLICATION OF PREMIUMS...........................16
GRACE PERIOD......................................16
ACCUMULATION UNIT VALUES..........................17
RIGHT TO REFUND...................................18
EXCHANGE OF A POLICY FOR A BMA POLICY.............18
3. INVESTMENT CHOICES.....................................18
TRANSFERS.........................................19
DOLLAR COST AVERAGING.............................20
ASSET REBALANCING OPTION..........................21
ASSET ALLOCATION OPTION...........................21
SUBSTITUTION......................................22
4. EXPENSES...............................................22
PREMIUM CHARGE....................................22
MONTHLY DEDUCTION.................................22
SURRENDER CHARGE..................................24
PARTIAL SURRENDER FEE.............................24
WAIVER OF SURRENDER CHARGES.......................24
TRANSFER FEE......................................25
TAXES .........................................25
INVESTMENT OPTION EXPENSES........................25
5. DEATH BENEFIT..........................................26
CHANGE IN DEATH BENEFIT OPTION....................28
CHANGE IN SPECIFIED AMOUNT........................29
GUARANTEED MINIMUM DEATH BENEFIT..................30
ACCELERATED DEATH BENEFIT.........................30
6. TAXES..................................................31
LIFE INSURANCE IN GENERAL.........................31
TAKING MONEY OUT OF YOUR POLICY...................31
DIVERSIFICATION...................................32
7. ACCESS TO YOUR MONEY...................................32
LOANS .........................................32
SURRENDERS........................................33
8. OTHER INFORMATION......................................34
BMA .........................................34
THE SEPARATE ACCOUNT..............................34
DISTRIBUTORS......................................35
ADMINISTRATION....................................35
SUSPENSION OF PAYMENTS OR TRANSFERS...............35
OWNERSHIP.........................................35
PART II ...........................................................36
EXECUTIVE OFFICERS AND DIRECTORS OF BMA...........36
OFFICERS AND DIRECTORS OF JONES & BABSON, INC.....52
OFFICERS AND DIRECTORS OF CONSECO EQUITY
SALES, INC......................................52
VOTING .........................................37
LEGAL OPINIONS....................................38
REDUCTION OR ELIMINATION OF SURRENDER CHARGE......38
NET AMOUNT AT RISK................................39
MATURITY DATE.....................................39
MISSTATEMENT OF AGE OR SEX........................40
OUR RIGHT TO CONTEST..............................40
PAYMENT OPTIONS...................................40
FEDERAL TAX STATUS................................40
REPORTS TO OWNERS.................................44
LEGAL PROCEEDINGS.................................45
EXPERTS .........................................45
FINANCIAL STATEMENTS..............................45
APPENDIX A..........................................................46
DEFINITIONS
ACCUMULATION VALUE: The sum of Your Policy values in the Subaccounts, the Fixed
Account and the Loan Account.
ACCUMULATION UNIT: A unit of measure used to calculate Your Accumulation Value
in the Subaccounts.
AGE: Issue Age is age nearest birthday on the Policy Date. Attained Age is the
Issue Age plus the number of completed Policy Years.
AUTHORIZED REQUEST: A request, in a form satisfactory to Us, which is received
by the BMA Service Center.
BENEFICIARY: The person named in the application or at a later date to receive
the Death Proceeds of the Policy or any rider(s).
BMA SERVICE CENTER: The office indicated in the Summary to which notices,
requests and Premiums must be sent. All sums payable to Us under the Policy are
payable only at the BMA Service Center.
BUSINESS DAY: Each day that the New York Stock Exchange is open for business.
The Separate Account will be valued each Business Day.
CASH SURRENDER VALUE: The Accumulation Value less the surrender charge, if any,
that applies if the Policy is surrendered in full and less any Indebtedness.
COMPANY: Business Men's Assurance Company of America (BMA).
DEATH BENEFIT: The amount used to determine the Death Proceeds payable upon the
death of the Primary Insured. The Death Benefit can be either Level or
Adjustable.
DEATH PROCEEDS: Equal the Death Benefit as of the date of the Primary Insured's
death, less any Indebtedness.
FIXED ACCOUNT: A portion of the General Account into which You can allocate Net
Premiums or transfer Accumulation Values. It does not share in the investment
experience of any Subaccount of the Separate Account.
GENERAL ACCOUNT: Our general investment account which contains all of Our assets
with the exception of the Separate Account and other segregated asset accounts.
GRACE PERIOD: The 61 days that follow the date We mail a notice to You for
payment if the Cash Surrender Value is not sufficient to cover the Monthly
Deduction.
INDEBTEDNESS: Unpaid Policy loans plus unpaid Policy loan interest.
INITIAL SPECIFIED AMOUNT: The amount of coverage selected by You at the time of
application and which will be used to determine the Death Benefit.
INVESTMENT OPTION(S): Those investment options available through the Separate
Account.
LOAN ACCOUNT: An account established within Our General Account for any amounts
transferred from the Fixed Account and the Separate Account as a result of
loans. The Loan Account is credited with interest and is not based on the
experience of any Separate Account.
MATURITY DATE: The date the Accumulation Value, less any Indebtedness, becomes
payable to You, if the Primary Insured is then living.
MINIMUM SPECIFIED AMOUNT: The smallest Specified Amount the Policy may have is
the greater of $50,000, and the Specified Amount a $300 no-lapse annual premium,
excluding amounts for riders and Special Rate Classes, will purchase.
MONTHLY ANNIVERSARY DAY: The same day of each month as the Policy Date for each
succeeding month the Policy remains in force. If the Monthly Anniversary falls
on a day that is not a Business Day, any Policy transaction due as of that day
will be processed the first Business Day following such date.
MONTHLY DEDUCTION: On the Policy Date and each Monthly Anniversary Day
thereafter We deduct certain charges from Your Policy.
NET PREMIUM: We deduct a Premium Charge from each Premium paid. The Net Premium
is the Premium paid less the Premium Charge.
OWNER: The person entitled to all the ownership rights under the Policy. If
Joint Owners are named, all references to You or Owner shall mean Joint Owner.
POLICY ANNIVERSARY: The same month and day as the Policy Date for each
succeeding year the Policy remains in force.
POLICY DATE: The date by which Policy months, years and anniversaries are
measured.
POLICY MONTH: The one month period from the Policy Date to the same date of the
next month, or from one Monthly Anniversary Day to the next.
POLICY YEAR: The one year period from the Policy Date to the first Policy
Anniversary or from one Policy Anniversary to the next.
PREMIUM: A payment You make towards the Policy and that does not re-pay any
Indebtedness.
PRIMARY INSURED: The person whose life is insured under the Policy.
RATE CLASS: This is anything that would affect the level of Your Premium, such
as health status and tobacco use.
REINSTATEMENT: To restore coverage after the Policy has terminated.
SEPARATE ACCOUNT: A segregated asset account maintained by Us in which a portion
of Our assets has been allocated for this and certain other policies.
SPECIFIED AMOUNT: The Initial Specified Amount plus each increase to the
Specified Amount and less each decrease to the Specified Amount.
UNDERWRITING PROCESS: The underwriting process begins the day We receive Your
application at the Service Center and ends the day We receive and approve all
required documents, including the initial Premium, necessary to put the Policy
in force.
US, WE, OUR: Business Men's Assurance Company of America.
YOU, YOUR, YOURS: The Owner of the Policy.
SUMMARY
The Prospectus is divided into three sections: Summary, Part I and Part II. The
sections in this Summary correspond to sections in Part I of this Prospectus
which discuss the topics in more detail. Even more detailed information is
contained in Part II.
1. THE VARIABLE LIFE INSURANCE POLICY
The variable life insurance policy offered by BMA is a contract between You, the
Owner, and BMA, an insurance company.
The Policy provides for the payment of the Death Proceeds to Your selected
Beneficiary upon the death of the Primary Insured which should be excludable
from the gross income of the Beneficiary. The Policy can be used to create or
conserve one's estate or to save for retirement. The Policy can also be used for
certain business purposes, such as keyman insurance. The Primary Insured is the
person whose life is insured under the Policy. The Primary Insured can be the
same person as the Owner but does not have to be.
Under the Policy, You may, subject to certain limitations, make Premium
payments, in any amount and at any frequency. The Policy provides an
Accumulation Value, surrender rights, loan privileges and other features
traditionally associated with life insurance.
The Policy has a no-lapse guarantee in the first five years providing the
No-Lapse Monthly Minimum Premiums are paid. After this period, the Policy can
lapse (terminate without value) when the Cash Surrender Value is insufficient to
cover the Monthly Deduction and a Grace Period of 61 days has expired without an
adequate payment being made.
2. PURCHASES
You can buy the Policy by completing the proper forms. Your registered
representative can help You. The minimum initial Premium We will accept will be
computed for You with respect to the Specified Amount You have requested. We
will also compute the No-Lapse Monthly Minimum Premium. In some circumstances We
may contact You for additional information regarding the Primary Insured and may
require the Primary Insured to provide Us with medical records, physician's
statement or a complete paramedical examination.
The Policy is a flexible premium policy and unlike traditional insurance
policies, there is no fixed schedule for Premium payments after the initial
Premium. Although You may establish a schedule of Premium payments (Planned
Premium), failure to make the Planned Premium payments will not necessarily
cause the Policy to lapse nor will making the Planned Premium guarantee that a
Policy will remain in force until maturity. Under most circumstances it is
anticipated that You will need to make additional Premium payments, after the
initial Premium, to keep the Policy in force.
3. INVESTMENT CHOICES
You can put Your money in the Fixed Account or in any or all of these Investment
Options which are described in the prospectuses for the funds:
INVESTORS MARK SERIES FUND, INC.
MANAGED BY STANDISH, AYER & WOOD, INC.
Intermediate Fixed Income
Mid Cap Equity
Money Market
MANAGED BY STANDISH INTERNATIONAL MANAGEMENT COMPANY, L.P.
Global Fixed Income
MANAGED BY STEIN ROE & FARNHAM, INCORPORATED
Small Cap Equity
Large Cap Growth
MANAGED BY DAVID L. BABSON & CO. INC.
Large Cap Value
MANAGED BY LORD, ABBETT & CO.
Growth & Income
MANAGED BY KORNITZER CAPITAL MANAGEMENT, INC.
Balanced
BERGER INSTITUTIONAL PRODUCTS TRUST
MANAGED BY BERGER ASSOCIATES
Berger IPT - 100
Berger IPT - Growth and Income
Berger IPT - Small Company Growth
MANAGED BY BBOI WORLDWIDE LLC
Berger/BIAM IPT - International
CONSECO SERIES TRUST
MANAGED BY CONSECO CAPITAL MANAGEMENT, INC.
Asset Allocation
Common Stock
Corporate Bond
Government Securities
THE ALGER AMERICAN FUND
MANAGED BY FRED ALGER MANAGEMENT, INC.
Alger American Growth
Alger American Leveraged AllCap
Alger American MidCap Growth
Alger American Small Capitalization
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
MANAGED BY AMERICAN CENTURY INVESTMENT
MANAGEMENT, INC.
VP Income & Growth
VP International
VP Value
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
MANAGED BY THE DREYFUS CORPORATION
DREYFUS STOCK INDEX FUND
MANAGED BY THE DREYFUS CORPORATION
DREYFUS VARIABLE INVESTMENT FUND
MANAGED BY THE DREYFUS CORPORATION
Disciplined Stock
International Value
FEDERATED INSURANCE SERIES
MANAGED BY FEDERATED ADVISERS
Federated High Income Bond II
Federated International Equity II
Federated Utility II
INVESCO VARIABLE INVESTMENT FUNDS, INC.
MANAGED BY INVESCO FUNDS GROUP, INC.
INVESCO VIF - High Yield
INVESCO VIF - Industrial Income
LAZARD RETIREMENT SERIES, INC.
MANAGED BY LAZARD ASSET MANAGEMENT
Lazard Retirement Equity
Lazard Retirement Small Cap
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
MANAGED BY NEUBERGER & BERMAN MANAGEMENT INCORPORATED
Limited Maturity Bond
Partners
STRONG OPPORTUNITY FUND II, INC.
MANAGED BY STRONG CAPITAL MANAGEMENT, INC.
Opportunity Fund II
STRONG VARIABLE INSURANCE FUNDS, INC.
MANAGED BY STRONG CAPITAL MANAGEMENT, INC.
Growth Fund II
VAN ECK WORLDWIDE INSURANCE TRUST
MANAGED BY VAN ECK ASSOCIATES CORPORATION
Worldwide Bond
Worldwide Emerging Markets
Worldwide Hard Assets
Worldwide Real Estate
4. EXPENSES
The Policy has both insurance and investment features, and there are costs
related to each that reduce the return on Your investment.
We deduct a Premium Charge from each Premium payment made. The Premium Charge is
as follows:
Policy Years 1-10: 5.5% of all Premiums.
Policy Years 11 and later: 4.0% of all Premiums.
We deduct a Policy Charge each month from the unloaned Accumulation Value of the
Policy. The Policy Charge is as follows:
Policy Year 1: $25 each month
Policy Years 2 and later: Currently, $5 each month. This
charge is not guaranteed and
may be increased but it will not
exceed $10.
We deduct a Risk Charge each month from the unloaned Accumulation Value of the
Policy. The Risk Charge is calculated as follows:
Policy Years 1-10: Each month, .80%, on an annual
basis, of the Accumulation
Value in the Separate Account.
Policy Years 11 and later: Each month, .40%, on an annual
basis, of the Accumulation
Value in the Separate Account.
Each month We will make a deduction from the unloaned Accumulation Value of the
Policy for the cost of insurance. This charge will depend upon the Specified
Amount, Your Accumulation Value, and the sex, age and Rate Class of the Primary
Insured. We may also charge for any riders attached to the Policy. The maximum
deduction that will be made for cost of insurance is 83.33333 per $1,000 net
amount at risk. This is the rate at attained age 98. Therefore, this is most
likely not the rate You will be charged. Maximum rates vary by sex, tobacco use
and attained age and range from 0.08420 to 83.33333 per $1,000 net amount at
risk. See "Expenses - Monthly Deduction - Cost of Insurance" in Part I for more
information.
There are also daily investment charges which apply to the average daily value
of the Investment Options. These charges are deducted from the Investment
Options and range on an annual basis from .45% to 1.50%, depending on the
Investment Option.
If You take out more than the Free Partial Surrender Percentage, We may assess a
surrender charge which depends upon Your Initial Specified Amount, the year of
surrender, issue Age, sex and Rate Class. The maximum surrender charge that will
be deducted is 44.56 per $1,000 specified amount. The maximum varies by issue
age, sex and tobacco use and ranges from 5.40 to 44.56 per $1,000. See "Expenses
- - Surrender Charge" in Part I for more information. The surrender charge for
total surrenders is level for the first four Policy Years then grades down each
month beginning in the fifth Policy Year and is zero at the end of Policy Year
ten. Your Policy is issued with a surrender charge schedule which shows the
surrender charge at the end of the Policy Year. The surrender charge is level
for the first four Policy Years. Beginning in the fifth Policy Year, the
surrender charge reduces each Policy Month by linearly interpolating the prior
and current years' end of year surrender charges. The interpolation is based on
the number of completed Policy Months for the current Policy Year. The charge is
not affected by Special Rate Classes nor by the addition of riders. When You
make a partial surrender, We assess a pro-rata portion of the surrender charge.
In the event that You increase Your Specified Amount, a new surrender charge
will be imposed on the increased amount. The surrender and partial surrender
charges are deducted from the unloaned Accumulation Value of the Policy. The
partial surrender charge is deducted pro-rata from the Investment Option(s)
and/or the Fixed Account from which the withdrawal is made.
There is a partial surrender fee of $25 assessed for any partial surrender in
addition to any surrender charge that may be assessed. The partial surrender fee
is deducted from the unloaned Accumulation Value of the Policy. The partial
surrender fee is deducted pro-rata from the Investment Option(s) and/or Fixed
Account from which the withdrawal is made. The Free Partial Surrender Percentage
is excluded from these charges.
Each transfer after 12 in any Policy Year, unless the transfer is pre-scheduled,
will incur a transfer fee of $25. The transfer fee is deducted from the amount
transferred.
5. DEATH BENEFIT
The amount of the Death Benefit depends on the Specified Amount of Your Policy,
the Death Benefit option in effect at the time of death and under some
circumstances Your Policy's Accumulation Value. There are two Death Benefit
options: Level Death Benefit and Adjustable Death Benefit. Under certain
circumstances You can change Death Benefit options. You can also change the
Specified Amount under certain circumstances.
The actual amount payable to Your Beneficiary is the Death Proceeds which is
equal to the Death Benefit less any Indebtedness. At the time of application for
a Policy, You designate a Beneficiary who is the person or persons who will
receive the Death Proceeds. You can change Your Beneficiary unless You have
designated an irrevocable Beneficiary. The Beneficiary does not have to be a
natural person.
All or part of the Death Proceeds may be paid in a lump sum or applied under one
of the Payment Options contained in the Policy.
6. TAXES
Your Policy has been designed to comply with the definition of life insurance in
the Internal Revenue Code. As a result, the Death Proceeds paid under the Policy
should be excludable from the gross income of the Beneficiary. Your earnings in
the Policy are not taxed until You take them out. The tax treatment of the loan
proceeds and surrender proceeds will depend on whether the Policy is considered
a Modified Endowment Contract (MEC). Proceeds taken out of a MEC are considered
to come from earnings first and are includible in taxable income. If You are
younger than 59 1/2 when You take money out of a MEC, You may also be subject to
a 10% federal tax penalty on the earnings withdrawn.
7. ACCESS TO YOUR MONEY
You can terminate the Policy at any time and We will pay You the Cash Surrender
Value. After the first Policy Year, You may surrender a part of the Cash
Surrender Value subject to the requirements of the Policy. When You terminate
Your Policy or make a partial surrender, a surrender charge (or a portion
thereof in the case of a partial surrender) may be assessed. In the case of a
partial surrender We assess a Partial Surrender Fee of $25. Once each Policy
Year, on a non-cumulative basis, You may make a free partial surrender up to 10%
of Your unloaned Accumulation Value.
You can also borrow some of Your Accumulation Value.
8. OTHER INFORMATION
FREE LOOK. You can cancel the Policy within ten days after You receive
it (or whatever period is required in Your state) and We will refund all
Premiums paid less any Indebtedness. Upon completion of the Underwriting
Process, We will allocate the initial Net Premium to the Money Market Portfolio
for fifteen days (or the Free Look period required in Your state plus five
days). After that, We will invest Your Accumulation Value as You requested.
WHO SHOULD PURCHASE THE POLICY? The Policy is designed for individuals
and businesses that have a need for death protection but who also desire to
potentially increase the values in their Policies through investment in the
Investment Options. The Policy offers the following to individuals:
o create or conserve one's estate
o supplement retirement income
o access to funds through loans and surrenders
The Policy offers the following to businesses:
o protection for the business in the event a key employee dies
o provide debt protection for business loans
o create a fund for employee benefits, buy outs and future business
needs.
If You currently own a variable life insurance policy on the life of the Primary
Insured, You should consider whether the purchase of the Policy is appropriate.
Also, You should carefully consider whether the Policy should be used to replace
an existing Policy on the life of an Insured.
Additional Features.
o You can arrange to have a regular amount of money automatically
transferred from the Money Market Portfolio to the Investment Options
each month, theoretically giving You a lower average cost per unit
over time than a single one time purchase. We call this feature the
Dollar Cost Averaging Option.
o We will automatically readjust Your money between Investment Options
periodically to keep the blend You select. We call this feature the
Asset Rebalancing Option.
o If the Primary Insured becomes terminally ill, We will pay You a
portion of the Death Benefit. We call this feature the Accelerated
Death Benefit Rider.
o If You pay a certain required Premium, We guarantee that the Policy
will not lapse even if Your Accumulation Value is not sufficient to
cover the Monthly Deductions. We call this feature the Guaranteed
Minimum Death Benefit Rider.
o If the Primary Insured becomes totally disabled, We will waive the
Monthly Deduction, excluding the Risk Charge, or the Planned Premium.
This is provided by the Waiver of Monthly Deductions Rider or the
Waiver of Planned Premium Rider.
o We also offer a number of additional riders that are common for
universal life policies.
These features and riders may not be available in Your state and may not be
suitable for Your particular situation.
9. INQUIRIES
If You need more information about buying a Policy, please contact Us at:
BMA
P.O. Box 412879
Kansas City, Missouri 64141-2879
1-888-262-8131
If You need policy owner service (such as changes in policy information, inquiry
into policy values, or to make a loan), please contact Us at our service center:
BMA
P.O. Box 66793
St. Louis, Missouri 63166-6793
1-800-423-9398
PART I
1. THE VARIABLE LIFE INSURANCE POLICY
The variable life insurance policy is a contract between You, the Owner, and
BMA, an insurance company. The Policy can be used to create or conserve one's
estate and retirement planning for individuals. It can also be used for certain
business purposes.
The Policy provides for life insurance coverage on the Primary Insured and has
Accumulation Values, a Death Benefit, surrender rights, loan privileges and
other characteristics associated with traditional and universal life insurance.
However, since the Policy is a variable life insurance policy, the Accumulation
Value, to the extent invested in the Investment Options, will increase or
decrease depending upon the investment experience of those Investment Options.
The duration or amount of the Death Benefit may also vary based on the
investment performance of the underlying Investment Options. To the extent You
allocated Premium or Accumulation Value to the Separate Account, You bear the
investment risk. If the Cash Surrender Value is insufficient to pay the Monthly
Deductions, the Policy may terminate.
Because the Policy is like traditional and universal life insurance, it provides
a Death Benefit which will be paid to Your named Beneficiary. When the Primary
Insured dies, the Death Proceeds are paid to Your Beneficiary which should be
excludable from the gross income of the Beneficiary. The tax-free Death Proceeds
makes this an excellent way to accumulate money You don't think you'll use in
Your lifetime and is a tax-efficient way to provide for those You leave behind.
If You need access to Your money, You can borrow from the Policy or make a total
or partial surrender.
2. PURCHASES
PREMIUMS
Premiums are the monies You give Us to buy the Policy. The Policy is a Flexible
Premium Policy which allows You to make Premium payments in any amount and at
any time, subject of course to making sufficient Premium payments to keep the
Policy in force. Even though the Policy is flexible, when You apply for coverage
You can establish a schedule of Premium payments (Planned Premium). The Planned
Premium is selected by You. Thus they will differ from Policy to Policy. You
should consult Your Registered Representative about Your Planned Premium.
We guarantee that the Policy will stay in force for the first five years after
issue if total Premiums paid are at least as great as:
1. the cumulative five year No-Lapse Monthly Minimum Premium; plus
2. the total of all partial surrenders made; plus
3. indebtedness.
We will establish a No-Lapse Monthly Minimum Premium at the time you apply for
coverage which is the smallest level of Planned Premium.
The Policy will remain in force if the Cash Surrender Value is greater than zero
regardless of how long it has been in force.
Additional Premiums may be paid at any time. However, We reserve the right to
limit the number and amount of additional Premiums. Under some circumstances, We
may require evidence that the Primary Insured is still insurable. All Premiums
are payable at the BMA Service Center.
WAIVER OF PLANNED PREMIUMS
You can elect to have a Waiver of Planned Premium Rider added to Your Policy.
The rider provides for the Planned Premium to be waived by crediting a Premium
equal to the monthly waiver benefit on each Monthly Anniversary Day during the
Primary Insured's total disability beginning before age 60 and continuing 6
months or more. Premiums paid during the first 6 months of disability are
refunded, and subsequent Premiums are waived as long as total disability
continues. The monthly waiver benefit to be credited as a Premium to the Policy
while benefits are payable under the rider is the Planned Premium at the time
the disability begins.
All Monthly Deductions will continue to be made.
If at the end of any Policy Month while benefits are being paid under the rider,
the Cash Surrender Value is not sufficient to cover the Monthly Deductions, the
credit of the monthly waiver benefit will cease, and the Monthly Deductions will
be waived as long as total disability continues.
You should consult the rider for the terms and conditions. The rider is
available as an alternative to the Waiver of Monthly Deductions. You can select
either the Waiver of Monthly Deduction Rider or the Waiver of Planned Premium
Rider but not both.
APPLICATION FOR A POLICY
In order to purchase a Policy, You must submit an application to Us that
requests information about the proposed Primary Insured. In some cases, We will
ask for additional information. We may request that the Primary Insured provide
Us with medical records, physician's statement or possibly require other medical
tests.
ISSUE AGES:
We currently issue to Primary Insureds whose ages are: 20-80 for Standard rates
and 20-70 for Preferred rates.
We will review all the information We are provided about the Primary Insured and
determine whether or not the Primary Insured meets Our standards for issuing the
Policy. This process is called underwriting. If the Primary Insured meets all of
Our underwriting requirements, We will issue a Policy. There are several
underwriting classes under which the Policy may be issued.
The underwriting period could be up to 60 days or longer from the time the
application is signed. If We receive the initial Premium with the application,
Your Registered Representative will give you a conditional receipt. If You
receive a conditional receipt, you will have conditional coverage. The
conditional receipt provides coverage from the later date of receipt of the
application, the medical exam, if required, and the money being received at the
Service Center. It will expire 60 days from the effective date. The conditional
insurance is subject to a number of restrictions and is only applicable if the
proposed Primary Insured was an acceptable risk for the insurance applied for.
APPLICATION OF PREMIUMS
When You purchase a Policy and We receive money with Your application, We will
initially put Your money in Our General Account. Your money will remain in Our
General Account during the Underwriting Process. Upon completion of the
Underwriting Process, Your money will be moved to the Money Market Portfolio
where it will remain for 15 days (or the period required in Your state plus five
days). After the 15 days, We will allocate Your money to the Investment
Option(s) You requested in the application. All allocation directions must be in
whole percentages. If You pay additional Premiums, We will allocate them in the
same way as Your first Premium unless You tell Us otherwise.
If You change Your mind about owning a Policy, You can cancel it within 10 days
after receiving it (or the period required in Your state) (Free Look Period).
(If the Owner is a resident of California and is age 60 or older, the period is
30 days.) When You cancel the Policy within this time period, We will not assess
a Surrender Charge and will give You back Your Premium payment less any
Indebtedness.
When Your application for the Policy is in good order, We will invest Your first
Premium in the Money Market Portfolio within two days after We have completed
Our underwriting. Subsequent Premiums will be allocated in accordance with the
selections in Your application.
If as a result of Our underwriting review, We do not issue You a Policy, We will
return to You Your Premium, and interest, if any, required by Your state. If We
do issue a Policy, on the Policy Date We will deduct the first Monthly Deduction
and credit interest. The maximum first Monthly Deduction is 5.5% of Premium.
GRACE PERIOD
Your Policy will stay in effect as long as Your Cash Surrender Value is
sufficient to cover Monthly Deductions. If the Cash Surrender Value of Your
Policy is not enough to cover these deductions, We will mail You a notice. You
will have 61 days from the time the notice is mailed to You to send Us the
required payment. This is called the Grace Period. Because this Policy has a
five year no-lapse guarantee, the Policy will not terminate if the No Lapse
Monthly Minimum Premiums are paid during this five year period.
ACCUMULATION UNIT VALUES
The value of Your Policy that is invested in the Investment Option(s) will go up
or down depending upon the investment performance of the Investment Option(s)
You choose. In order to keep track of the value of Your Policy, We use a unit of
measure We call an Accumulation Unit. (An Accumulation Unit works like a share
of a mutual fund.)
Every Business Day We determine the value of an Accumulation Unit for each of
the Investment Options. The value of an Accumulation Unit for any given Business
Day is determined by multiplying a factor We call the net investment factor
times the value of the Accumulation Unit for the previous Business Day. We do
this for each Investment Option. The net investment factor is a number that
reflects the change (up or down) in an underlying Investment Option share. Our
Business Days are each day that the New York Stock Exchange is open for
business. Our Business Day closes when the New York Stock Exchange closes,
usually 4:00 P.M. Eastern time.
When You make a Premium payment, We credit Your Policy with Accumulation Units.
The number of Accumulation Units credited is determined by dividing the amount
of Net Premium allocated to an Investment Option by the value of the
Accumulation Unit for the Investment Option for the Business Day when the
Premium payment is applied to Your Policy.
We calculate the value of an Accumulation Unit for each Investment Option after
the New York Stock Exchange closes each Business Day and then apply it to Your
Policy.
When We assess the Monthly Deductions, We do so by deducting Accumulation Units
from Your Policy. When You have selected more than one Investment Option and/or
the Fixed Account, We make the deductions pro-rata from all the Investment
Options and the Fixed Account.
When You make a surrender We determine the number of Accumulation Units to be
deducted by dividing the amount of the surrender from an Investment Option by
the value of an Accumulation Unit for the Investment Option. The resulting
number of Accumulation Units is deducted from Your Policy. When You make a
transfer from one Investment Option to another We treat the transaction by its
component parts, i.e. a surrender and a purchase.
EXAMPLE:
On Monday We receive a Premium payment from You. You have told Us You want $700
of this payment to go to the Large Cap Value Portfolio. When the New York Stock
Exchange closes on that Monday, We determine that the value of an Accumulation
Unit for the Large Cap Value Portfolio is $12.70. We then divide $700 by $12.70
and credit Your Policy on Monday night with 55.12 Accumulation Units for the
Large Cap Value Portfolio.
RIGHT TO REFUND
To receive the tax treatment accorded life insurance under Federal laws,
insurance under the Policy must initially qualify and continue to qualify as
life insurance under the Internal Revenue Code. To maintain qualification to the
maximum extent permitted by law, We reserve the right to return Premiums paid
which We determine will cause any coverage under the Policy to fail to qualify
as life insurance under applicable tax law and any changes in applicable tax
laws or will cause it to become a Modified Endowment Contract (MEC).
Additionally, We reserve the right to make changes in the Policy or to make
distributions to the extent We determine necessary to continue to qualify the
Policy as life insurance and to comply with applicable laws. We will provide You
advance written notice of any change.
If subsequent Premiums will cause Your Policy to become a MEC We will contact
You prior to applying the Premium. If You elect to have the Premium applied, We
require that You acknowledge in writing that You understand the tax consequences
of a MEC before We will apply the Premiums. Section 6 contains a discussion of
certain tax considerations provisions including MECs.
EXCHANGE OF A POLICY FOR A BMA POLICY
Under federal tax law a life insurance policy may be exchanged tax-fee for
another life insurance policy. However, a policy received in exchange for a MEC
will also be treated as a MEC. Any exchange of a policy for a BMA Policy must
meet Our policy exchange rules in effect at that time.
3. INVESTMENT CHOICES
The Policy offers 44 investment choices - A Fixed Account and 43 Investment
Options. Additional Investment Options may be available in the future.
YOU SHOULD READ THE PROSPECTUSES FOR THESE FUNDS CAREFULLY BEFORE INVESTING.
COPIES OF THESE PROSPECTUSES ARE ATTACHED TO THIS PROSPECTUS. CERTAIN PORTFOLIOS
CONTAINED IN THE FUND PROSPECTUSES MAY NOT BE AVAILABLE WITH YOUR POLICY.
Shares of the funds are offered in connection with certain variable annuity
contracts and variable life insurance policies of various life insurance
companies which may or may not be affiliated with BMA. Certain portfolios are
also sold directly to qualified plans. The funds do not believe that offering
their shares in this manner will be disadvantageous to you.
INVESTORS MARK SERIES FUND, INC.
Investors Mark Series Fund, Inc. is managed by Investors Mark Advisors, LLC
(Adviser), which is an affiliate of BMA. Investors Mark Series Fund, Inc. is a
mutual fund with multiple portfolios. Each Investment option has a different
investment objective. The Adviser has engaged sub-advisers to provide investment
advice for the individual Investment Option. The following Investment Options
are available under the Policy.
STANDISH, AYER & WOOD, INC. IS THE SUB-ADVISER TO THE FOLLOWING PORTFOLIOS:
Intermediate Fixed Income Portfolio
Mid Cap Equity Portfolio
Money Market Portfolio
STANDISH INTERNATIONAL MANAGEMENT COMPANY, L.P. IS THE SUB-ADVISER TO THE
FOLLOWING PORTFOLIO:
Global Fixed Income Portfolio
STEIN ROE & FARNHAM, INCORPORATED IS THE SUB-ADVISER TO THE FOLLOWING
PORTFOLIOS:
Small Cap Equity Portfolio
Large Cap Growth Portfolio
DAVID L. BABSON & CO., INC. IS THE SUB-ADVISER TO THE FOLLOWING PORTFOLIO:
Large Cap Value Portfolio
LORD, ABBETT & CO. IS THE SUB-ADVISER TO THE FOLLOWING PORTFOLIO:
Growth & Income Portfolio
KORNITZER CAPITAL MANAGEMENT, INC. IS THE SUB-ADVISER TO THE FOLLOWING
PORTFOLIO:
Balanced Portfolio
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger Institutional Products Trust is a mutual fund with multiple portfolios.
Berger Associates is the investment adviser to all portfolios except the
Berger/BIAM IPT--International Fund. BBOI Worldwide LLC is the adviser to the
Berger/BIAM IPT--International Fund. BBOI Worldwide LLC has retained Bank of
Ireland Asset Management (U.S.) Limited ("BIAM"). The following Investment
Options are available under the Policy:
Berger IPT--100 Fund
Berger IPT--Growth and Income Fund
Berger IPT--Small Company Growth Fund
Berger/BIAM IPT--International Fund
CONSECO SERIES TRUST
Conseco Series Trust is a mutual fund with multiple portfolios. Conseco Capital
Management, Inc. is the investment adviser to the portfolios. The following
Investment Options are available under the Policy:
Asset Allocation Portfolio
Common Stock Portfolio
Corporate Bond Portfolio
Government Securities Portfolio
THE ALGER AMERICAN FUND
The Alger American Fund is a mutual fund with multiple portfolios. Fred Alger
Management, Inc. serves as the investment adviser. The following Investment
Options are available under the Policy:
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
American Century Variable Portfolios, Inc. is a series of funds managed by
American Century Investment Management, Inc. The following Investment Options
are available under the Policy:
VP Income & Growth
VP International
VP Value
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is managed by The Dreyfus
Corporation. Dreyfus has hired NCM Capital Management Group, Inc. to serve as
sub-investment adviser and provide day-to-day management of the Fund's
investments.
DREYFUS STOCK INDEX FUND
The Dreyfus Corporation serves as the Fund's manager. Dreyfus has hired its
affiliate, Mellon Equity Associates, to serve as the Fund's index fund manager
and provide day-to-day management of the Fund's investments.
DREYFUS VARIABLE INVESTMENT FUND
The Dreyfus Variable Investment Fund is a mutual fund with multiple portfolios.
The Dreyfus Corporation serves as the investment adviser. The following
Investment Options are available under the Policy:
Disciplined Stock Portfolio
International Value Portfolio
FEDERATED INSURANCE SERIES
Federated Insurance Series is a mutual fund with multiple portfolios. Federated
Advisers is the investment adviser. The following Investment Options are
available under the Policy:
Federated High Income Bond Fund II
Federated International Equity Fund II
Federated Utility Fund II
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO Variable Investment Funds, Inc. is a mutual fund with multiple
portfolios. INVESCO Funds Group, Inc. is the investment adviser. The following
Investment Options are available under the Policy:
INVESCO VIF - High Yield Portfolio
INVESCO VIF - Industrial Income Portfolio
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Series, Inc. is a mutual fund with multiple portfolios. Lazard
Asset Management, a division of Lazard Freres & Co. LLC, is the investment
manager for each portfolio. The following Investment Options are available under
the Policy:
Lazard Retirement Equity Portfolio
Lazard Retirement Small Cap Portfolio
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Each portfolio of Neuberger & Berman Advisers Management Trust invests in a
corresponding series of Advisers Managers Trust. All series of Advisers Managers
Trust are managed by Neuberger & Berman Management Incorporated. The following
Investment Options are available under the Policy:
Limited Maturity Bond Portfolio
Partners Portfolio (capital growth)
STRONG OPPORTUNITY FUND II, INC.
Strong Opportunity Fund II, Inc. is a mutual fund managed by Strong Capital
Management, Inc. The following Investment Option is available under the Policy:
Opportunity Fund II (capital growth)
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Variable Insurance Funds, Inc. is a mutual fund with multiple series.
Strong Capital Management, Inc. serves as the investment adviser. The following
Investment Option is available under the Policy:
Growth Fund II
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust is a mutual fund with multiple portfolios
which are managed by Van Eck Associates Corporation. The following Investment
Options are available under the Policy:
Worldwide Bond Fund
Worldwide Emerging Markets Fund
Worldwide Hard Assets Fund
Worldwide Real Estate Fund
TRANSFERS
You can transfer money among the Fixed Account and the Investment Options. You
can make 12 free transfers each Policy Year. You can make a transfer to or from
the Fixed Account and to or from any Investment Option. If You make more than 12
transfers in a year, there is a transfer fee deducted. The fee is $25 per
transfer. The transfer fee is deducted from the amount which is transferred. The
following apply to any transfer:
1. The minimum amount which You can transfer from the Fixed Account or
any Investment Option is $250 or Your entire interest in the Investment
Option or the Fixed Account, if the remaining balance is less than
$250.
2. The maximum amount which can be transferred from the Fixed Account
is limited to 25% of the Accumulation Value in the Fixed Account. Only
one transfer out of the Fixed Account is allowed each Policy Year.
These requirements are waived if the transfer is pursuant to a
pre-scheduled transfer.
3. The minimum amount which must remain in any Investment Option or
Fixed Account after a transfer is $250.
4. A transfer will be effective as of the end of the Business Day when
We receive an Authorized Request at the BMA Service Center.
5. Neither Us nor Our BMA Service Center are liable for a transfer made
in accordance with Your instructions.
6. We reserve the right to restrict the number of transfers per year
and to restrict transfers from being made on consecutive Business Days.
7. Your right to make transfers is subject to modification if We
determine, in Our sole opinion, that the exercise of the right by one
or more Owners is, or would be, to the disadvantage of other Owners.
Restrictions may be applied in any manner reasonably designed to
prevent any use of the transfer right which is considered by Us to be
to the disadvantage of other Owners. A modification could be applied to
transfers to or from one or more of the Investment Options and could
include but not be limited to:
a. a requirement of a minimum time period between each transfer;
b. not accepting transfer requests of an agent acting under a power
of attorney on behalf of more than one Owner; or
c. limiting the dollar amount that may be transferred by an Owner at
any one time.
8. During times of drastic economic or market conditions, We may
suspend the transfer privilege temporarily without notice and treat
transfer requests based on their separate components - a redemption
order with a simultaneous request for purchase of another Investment
Option. In such a case, the redemption request would be processed at
the source Investment Option's next determined Accumulation Unit value
but the purchase into the new Investment Option would be effective at
the next determined Accumulation Unit value for the new Investment
Option only after We receive the proceeds from the source Investment
Option or We otherwise receive cash on behalf of the Investment Option.
You may elect to make transfers by telephone. To elect this option You must do
so in an Authorized Request. If there are Joint Owners, unless We are instructed
to the contrary, instructions will be accepted from either one of the Joint
Owners. We will use reasonable procedures to confirm that instructions
communicated by telephone are genuine. If We do not, We may be liable for any
losses due to unauthorized or fraudulent instructions. The BMA Service Center
tape records all telephone instructions. Transfers do not change the allocation
instructions for future Premiums.
DOLLAR COST AVERAGING
The Dollar Cost Averaging Option allows You to systematically transfer a set
amount each month from the Money Market Portfolio to any of the other Investment
Option(s). By allocating amounts on a regular schedule as opposed to allocating
the total amount at one particular time, You may be less susceptible to the
impact of market fluctuations.
The minimum amount which can be transferred each month is $250. You must have an
unloaned Accumulation Value of at least $5,000. The amount required to complete
Your program must be in the source account in order to participate in dollar
cost averaging.
All dollar cost averaging transfers will be made on the 15th day of the month
unless that day is not a Business Day. If it is not, then the transfer will be
made the next Business Day. You must participate in dollar cost averaging for at
least 6 months.
If You participate in dollar cost averaging, the transfers made under this
option are not taken into account in determining any transfer fee.
ASSET REBALANCING OPTION
Once Your money has been allocated among the Investment Options, the performance
of the Accumulation Value of each option may cause Your allocation to shift. If
the unloaned Accumulation Value of Your Policy is at least $5,000, You can
direct Us to automatically rebalance Your Policy each quarter to return to Your
original percentage allocations by selecting Our asset rebalancing option. The
program will terminate if You make any transfer outside of the Investment
Options You have selected under the asset rebalancing option. The minimum period
to participate in this program is 6 months. The transfer date will be the 15th
of the month unless that day is not a Business Day. If it is not, then the
transfer will be made the next Business Day. The Fixed Account is not part of
asset rebalancing.
If You participate in the asset rebalancing option, the transfers made under the
program are not taken into account in determining any transfer fee.
EXAMPLE:
Assume that You want the Accumulation Value split between 2 Investment Options.
You want 40% to be in the Intermediate Fixed Income Portfolio and 60% to be in
the Mid Cap Equity Portfolio. Over the next 2 1/2 months the bond market does
very well while the stock market performs poorly. At the end of the first
quarter, the Intermediate Fixed Income Portfolio now represents 50% of Your
holdings because of its increase in value. If You had chosen to have Your
holdings rebalanced quarterly, on the first day of the next quarter, We would
sell some of Your units in the Intermediate Fixed Income Portfolio to bring its
value back to 40% and use the money to buy more units in the Mid Cap Equity
Portfolio to increase those holdings to 60%.
ASSET ALLOCATION OPTION
We recognize the value to certain Owners of having available, on a continuous
basis, advice for the allocation of Your money among the Investment Options
available under the Policy. Certain providers of these types of services have
agreed to provide such services to Owners in accordance with Our administrative
rules regarding such programs.
We have made no independent investigation of these programs. We have only
established that these programs are compatible with Our administrative systems
and rules.
Even though We permit the use of approved asset allocation programs, the Policy
was not designed for professional market timing organizations. Repeated patterns
of frequent transfers are disruptive to the operations of the Investment
Options, and when We become aware of such disruptive practices, We may modify
the transfer provisions of the Policy.
If You participate in an approved asset allocation program, the transfers made
under the program are not taken into account in determining any transfer fee.
SUBSTITUTION
We may be required to substitute one of the Investment Options You have selected
with another Investment Option. We would not do this without the prior approval
of the Securities and Exchange Commission. We will give You notice of Our intent
to do this.
4. EXPENSES
There are charges and other expenses associated with the Policy that reduce the
return on Your investment in the Policy. The charges and expenses are:
PREMIUM CHARGE
We deduct a Premium Charge for each Premium You make. We consider a portion of
the Premium Charge a sales load. The sales load portion is 3.5% of Premiums paid
during the first ten Policy Years and 2.0% of Premiums paid thereafter. The
portion of the Surrender Charge that does not recover issue and underwriting
expenses is assessed as a sales load but only if the Policy is surrendered
during the first ten Policy Years. The Premium Charges are as follows:
Policy Years 1-10: 5.5% of all Premiums.
Policy Years 11 and 4.0% of all Premiums.
thereafter:
The Premium Charge is to cover some of Our costs incurred in selling the Policy
and in issuing it, such as commissions, premium tax, DAC tax (Deferred
Acquisition Costs) and administrative costs.
MONTHLY DEDUCTION
The initial Monthly Deduction is made on the Policy Date but does not include a
Risk Charge. On each Monthly Anniversary Day We make a Monthly Deduction from
the Accumulation Value of Your Policy. The Monthly Deduction will be taken on a
pro-rata basis from the Investment Options and the Fixed Account, exclusive of
the Loan Account. The Monthly Deduction equals:
a. the Cost of Insurance for the Policy; plus
b. the monthly rider charges; if any; plus
c. the Risk Charge; plus
d. the monthly Policy Charge
COST OF INSURANCE. This charge compensates Us for insurance coverage
provided during following the month. The cost of insurance charge for a Policy
month equals the appropriate current cost of insurance rate per $1,000,
including any special Rate Classes, times the net amount at risk. The net amount
at risk is different for the Level Death Benefit Option and the Adjustable Death
Benefit Option. Part II contains a more detailed description of the net amount
at risk.
The monthly cost of insurance rate, per $1,000 of net amount at risk, is based
on the Specified Amount, issue age, and Rate Class of the Primary Insured and
the Policy Year. The maximum monthly cost of insurance rate ranges from 0.08420
to 83.33333 per $1,000. The table below shows the largest maximum monthly cost
of insurance rate for all of the ages in the range. The maximum rate for most
ages in the range will be smaller.
Maximum Monthly Cost of Insurance Rates per $1,000
Attained Male Female
Age Non-Tobacco Tobacco Non-Tobacco Tobacco
- ------- ----------- ------- ----------- -------
20-29 0.14010 0.19437 0.10005 0.12341
30-39 0.17850 0.30049 0.16097 0.22778
40-49 0.37912 0.73630 0.32558 0.50808
50-59 0.96089 1.79681 0.66576 0.99290
60-69 2.65338 4.29327 1.63207 2.19463
70-80 8.16248 10.74533 5.59571 6.58858
81-99 83.33333 83.33333 83.33333 83.33333
Generally, We use a cost of insurance rate that is less than the maximum rate.
The table below compares the maximum cost of insurance rate to the rate that is
currently being used during the first Policy Year. The rates below are based on
the preferred non-tobacco Rate Class and a $150,000 Specified Amount.
Monthly Cost of Insurance Rate Comparison
Cost of Insurance Rate
Sex Issue Age Current Maximum
--- --------- ------- -------
Male 45 0.26313 0.27708
Female 50 0.31223 0.34983
Male 55 0.47878 0.65401
Monthly cost of insurance rates will be determined by Us based on the
expectations as to future experience. We may charge less than the maximum cost
of insurance rates as shown in the Table of Cost Insurance Rates contained in
Your Policy. Any change in the cost of insurance rates will apply to all Primary
Insureds of the same Age, sex, Rate Class and Policy Year. The cost of insurance
rates are greater for insureds in special Rate Classes.
MONTHLY RIDER CHARGES. We charge separately for any riders attached to
the Policy. We deduct the cost of the riders for a Policy Month as part of the
Monthly Deduction on each Monthly Anniversary Day.
RISK CHARGE. We assess a Risk Charge which is deducted as part of the
Monthly Deduction. The Risk Charge is calculated as follows:
Per Policy Month for Policy .80%, on an annual basis, of
Years 1-10: the Accumulation Value in the
Separate Account.
Per Policy Month for Policy .40%, on an annual basis, of
Years 11 and later: the Accumulation Value in the
Separate Account.
The Risk Charge compensates Us for some of the mortality risks We assume, and
the risk that We will experience costs above that for which We are compensated.
It also compensates Us for some of the administrative costs in administering the
Policy. We expect to profit from the charge.
POLICY CHARGE. We assess a Policy Charge which is deducted each Monthly
Anniversary Day. The Policy Charge is:
Per Policy Month for Policy $25
Year 1:
Per Policy Month for Policy Currently, $5. This charge is
Years 2 and later: not guaranteed and may be
increased but it will not
exceed $10.
The Policy Charge compensates Us for some of the administrative costs of the
Policy and the Separate Account.
WAIVER OF MONTHLY DEDUCTION. You can elect to have a Waiver of Monthly
Deduction Rider added to Your Policy. This rider provides for all monthly
deductions, excluding the Risk Charge, to be waived during the Primary Insured's
total disability beginning before age 60 and continuing 6 months or more. Any
Monthly Deductions, excluding the Risk Charge, made during the first 6 months
will be credited back to the Accumulation Value and subsequent monthly
deductions, excluding the Risk Charge, are waived as long as total disability
continues.
You should consult the rider for the terms and conditions. The rider is
available as an alternative to the Waiver of Planned Premiums. You can select
either the Waiver of Monthly Deduction Rider or the Waiver of Planned Premium
Rider but not both. The rider is not available if the Policy is issued with the
Guaranteed Minimum Death Benefit.
SURRENDER CHARGE
If the Policy is surrendered before the 10th Policy Anniversary or within 10
years following the effective date of any increase in Specified Amount, a
Surrender Charge may be deducted. The amount of the Surrender Charge depends
upon Your Specified Amount, the year of surrender, issue Age, sex and Rate
Class. The Surrender Charge specific to Your Policy is shown on Your Policy
Schedule. The maximum Surrender Charge that will be assessed ranges from 5.40 to
44.56 per $1,000 of Specified Amount. The table below shows the maximum
Surrender Charge per $1,000 for all of the ages in the range. The maximum
Surrender Charge for some ages in the range will be smaller.
Maximum Initial Surrender Charges per $1,000
Issue Male Female
Age Non-Tobacco Tobacco Non-Tobacco Tobacco
- ------- ----------- ------- ----------- -------
20-29 8.10 9.18 7.20 8.10
30-39 12.43 14.78 10.92 12.43
40-49 19.32 23.87 16.28 18.91
50-59 29.52 35.07 23.52 28.11
60-69 41.64 44.56 32.49 38.00
70-80 49.94 42.29 35.97 39.41
The charge is not affected by special Rate Classes nor by the addition of
riders. After the fourth Policy Year, or after four years following the
effective date of an increase, the Surrender Charge between Policy Years will be
pro-rated monthly. When there is a partial surrender of Cash Surrender Value, a
pro-rata portion of the Surrender Charge is assessed for any amount that the
Specified Amount is reduced. The pro-rata Surrender Charge is calculated in the
same manner as for a requested decrease.
The Surrender Charge and the pro-rata Surrender Charge compensates Us for the
costs associated with selling the Policy and for issue and underwriting
expenses.
PARTIAL SURRENDER FEE
When there is a partial surrender of the Cash Surrender Value, in addition to
any Surrender Charge that may be assessed, We will charge a Partial Surrender
Fee of $25. This charge compensates Us for administrative expenses associated
with a surrender.
WAIVER OF SURRENDER CHARGES
After the first Policy Anniversary, the Surrender Charge may be waived in the
following circumstances:
FREE PARTIAL SURRENDER AMOUNT. Once each Policy Year, on a non-cumulative
basis, You may make a free partial surrender up to 10% of the unloaned
Accumulation Value without the imposition of the Partial Surrender Fee or the
Surrender Charge. If the Policy is later totally surrendered for its Cash
Surrender Value, then the pro-rata Surrender Charges for each free partial
surrender will be assessed at the time of surrender.
CONFINEMENT. The Surrender Charge will not apply if: (1) You are
confined in a long term care facility, skilled or intermediate nursing facility
or hospital; (2) You have been so confined for at least 90 consecutive days; (3)
a physician certifies that confinement is required because of sickness or
injury; and (4) You were not so confined on the Policy Date. Proof of
confinement will be required in a form satisfactory to Us.
TOTAL DISABILITY. The Surrender Charge will not apply if: (1) You are
totally disabled; (2) You have been so disabled for at least 90 days; (3) a
physician certifies that You are totally disabled; and (4) You were not so
disabled on the Policy Date. Proof of disability will be required in a form
satisfactory to Us.
INVOLUNTARY UNEMPLOYMENT. The Surrender Charge will not apply if: (1)
You were employed on a "full time" basis (working at least 17 hours per week) on
the Policy Date; (2) Your employment was terminated by Your employer; (3) You
remain unemployed for at least 90 days; and (4) You certify in writing at the
time You make Your surrender request that You are still unemployed.
DIVORCE. The Surrender Charge will not apply if: (1) You were married
on the Policy Date; (2) subsequent to the Policy Date a divorce proceeding is
filed; and (3) You certify in writing at the time You make Your surrender
request that You are now divorced.
We will not assess pro-rata Surrender Charges for earlier free partial
withdrawals if You make a total surrender due to confinement, total disability,
involuntary unemployment or divorce.
Not all options may be available in all states.
REDUCTION OR ELIMINATION OF THE SURRENDER CHARGE
We may reduce or eliminate the amount of the Surrender Charge when the
Policy is sold under circumstances which reduce its sales expense. Some examples
are: if there is a large group of individuals that will be purchasing the Policy
or a prospective purchaser already had a relationship with Us. We will not
deduct a Surrender Charge under a Policy issued to an officer, director or
employee of BMA or any of its affiliates.
TRANSFER FEE
You can make 12 free transfers every Policy Year. If You make more than 12
transfers a year, We will deduct a transfer fee of $25. If We do assess a
transfer fee, it will be deducted from the amount transferred.
If the transfer is part of the Dollar Cost Averaging Option, the Asset
Rebalancing Option or Asset Allocation Option, it will not count in determining
the transfer fee.
TAXES
We may assess a charge against the Policy for any taxes attributable to the
Separate Account. We do not expect to incur any such taxes.
INVESTMENT OPTION EXPENSES
There are deductions from and expenses paid out of the assets of the various
Investment Options, which are summarized below. See the fund prospectuses for
more information.
INVESTMENT OPTION EXPENSES
(as a percentage of the average daily net assets of an Investment Option)
Total Annual
Other Portfolio
Expenses Expenses
(after (after
reimbursement reimbursement
Management 12b-1 for certain for certain
Fees Fees portfolios) portfolios)
------ ---- -------------- --------------
INVESTORS MARK SERIES FUND, INC.(1)
Intermediate Fixed Income Portfolio .60% -- .20% .80%
Mid Cap Equity Portfolio .80% -- .10% .90%
Money Market Portfolio .40% -- .10% .50%
Global Fixed Income Portfolio .75% -- .25% 1.00%
Small Cap Equity Portfolio .95% -- .10% 1.05%
Large Cap Growth Portfolio .80% -- .10% .90%
Large Cap Value Portfolio .80% -- .10% .90%
Growth & Income Portfolio .80% -- .10% .90%
Balanced Portfolio .80% -- .10% .90%
BERGER INSTITUTIONAL PRODUCTS TRUST (2)
Berger IPT--100 Fund .00% -- 1.00% 1.00%
Berger IPT--Growth and Income Fund .00% -- 1.00% 1.00%
Berger IPT--Small Company Growth Fund .00% -- 1.15% 1.15%
Berger/BIAM IPT - International Fund .00% -- 1.20% 1.20%
CONSECO SERIES TRUST (3)
Asset Allocation Portfolio(4) 0.55% -- 0.20% 0.75%
Common Stock Portfolio(4) 0.60% -- 0.20% 0.80%
Corporate Bond Portfolio 0.50% -- 0.20% 0.70%
Government Securities Portfolio 0.50% -- 0.20% 0.70%
THE ALGER AMERICAN FUND
Alger American Growth Portfolio 0.75% -- 0.04% 0.79%
Alger American Leveraged AllCap Portfolio (5) 0.85% -- 0.15% 1.00%
Alger American MidCap Growth Portfolio 0.80% -- 0.04% 0.84%
Alger American Small Capitalization Portfolio 0.85% -- 0.04% 0.89%
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
VP International 1.50% -- 0.0% 1.50%
VP Value 1.00% -- 0.0% 1.00%
VP Income & Growth 0.70% -- 0.0% 0.70%
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. 0.75% -- 0.07% 0.82%
DREYFUS STOCK INDEX FUND 0.25% -- 0.03% 0.28%
DREYFUS VARIABLE INVESTMENT FUND
Disciplined Stock Portfolio 0.75% -- 0.27% 1.02%
International Value Portfolio 1.00% -- 0.42% 1.42%
FEDERATED INSURANCE SERIES
Federated High Income Bond Fund II (6) 0.51% -- 0.29% 0.80%
Federated International Equity Fund II (6) 0.02% -- 1.21% 1.23%
Federated Utility Fund II (6) 0.48% -- 0.37% 0.85%
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF - High Yield Portfolio (7) 0.60% -- 0.27% 0.87%
INVESCO VIF - Industrial Income Portfolio (7) 0.75% -- 0.20% 0.95%
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Equity Portfolio (8) 0.75% 0.25% 0.50% 1.50%
Lazard Retirement Small Cap Portfolio (8) 0.75% 0.25% 0.50% 1.50%
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST(9)
Limited Maturity Bond Portfolio 0.65% -- 0.12% 0.77%
Partners Portfolio 0.80% -- 0.06% 0.86%
STRONG OPPORTUNITY FUND II, INC.
Opportunity Fund II 1.00% -- 0.15% 1.15%
STRONG VARIABLE INSURANCE FUNDS, INC.
Growth Fund II (10) 1.00% -- 0.20% 1.20%
VAN ECK WORLDWIDE INSURANCE TRUST (11)
Worldwide Bond Fund 1.00% -- 0.12% 1.12%
Worldwide Emerging Markets Fund 1.00% -- (.20)% 0.80%
Worldwide Hard Assets Fund 1.00% -- 0.17% 1.17%
Worldwide Real Estate Fund 0.00% -- 1.00% 1.00%
1. Investors Mark Advisors, LLC has voluntarily agreed to reimburse
expenses of each Portfolio of Investors Mark Series Fund, Inc. for the first
year of operations so that the annual expenses do not exceed the amounts set
forth above under "Total Annual Portfolio Expenses" for each Portfolio. Absent
such expense reimbursement, the Total Annual Portfolio Expenses are estimated to
be: 1.15% for the Money Market Portfolio; 2.04% for the Intermediate Fixed
Income Portfolio; 2.04% for the Global Fixed Income Portfolio; 1.10% for the Mid
Cap Growth Portfolio; 1.10% for the Balanced and Growth & Income Portfolios;
1.25% for the Small Cap Equity Portfolio; and 1.02% for the Large Cap Growth and
Large Cap Value Portfolios.
2. The Funds' investment advisers have voluntarily agreed to waive their
advisory fee and have voluntarily reimbursed the Funds for additional expenses
to the extent that normal operating expenses in any fiscal year, including the
investment advisory fee but excluding brokerage commissions, interest, taxes and
extraordinary expenses, of each of the Berger IPT--100 Fund and the Berger
IPT--Growth and Income Fund exceed 1.00%, and the normal operating expenses in
any fiscal year of the Berger IPT--Small Company Growth Fund exceed 1.15%, and
the normal operating expenses of the Berger/BIAM IPT - International Fund exceed
1.20% of the respective Fund's average daily net assets. Absent the voluntary
waiver and reimbursement, the Management Fee for the Berger IPT--100 Fund,
Berger IPT--Growth and income Fund, the Berger IPT--Small Company Growth Fund
and the Berger/BIAM IPT - International Fund would have been .75%, .75%, .90%,
and .90% respectively, and their Total Annual Portfolio Expenses would have been
9.18%, 9.62%, 5.81% and 3.83%, respectively.
3. Conseco Capital Management, Inc., the investment adviser of Conseco
Series Trust, has voluntarily agreed to reimburse all expenses, including
management fees, in excess of the following percentage of the average annual net
assets of each listed Portfolio, as long as such reimbursement would not result
in a Portfolio's inability to qualify as a regulated investment company under
the Code: 0.75% for the Asset Allocation Portfolio; 0.80% for the Common Stock
Portfolio; 0.70% for the Corporate Bond Portfolio and Government Securities
Portfolio. The total percentages in the above table is after reimbursement. In
the absence of expense reimbursement, the total fees and expenses in 1997 would
have totaled: 0.84% for the Asset Allocation Portfolio; 0.80% for the Common
Stock Portfolio; 0.77% for the Corporate Bond Portfolio; and 0.92% for the
Government Securities Portfolio.
4. Conseco Capital Management, Inc., since January 1, 1993, has voluntarily
waived its management fees in excess of the annual rates set forth above. Absent
such fee waivers, the management fees would be: .65% for the Asset Allocation
Portfolio; and .65% for the Common Stock Portfolio.
5. The Alger American Leveraged AllCap Portfolio's "Other Expenses" include
.04% of interest expense.
6. In the absence of a voluntary waiver by Federated Advisers, the Funds'
investment adviser, the Management Fee and Total Annual Portfolio Expenses would
have been 0.60% and 0.89%, respectively, for High Income Bond Fund II and 0.75%
and 1.12%, respectively, for Utility Fund II. Absent a voluntary waiver of the
management fee and the voluntary reimbursement of certain other operating
expenses by Federated Advisers, the Management Fee and Total Annual Portfolio
Expenses for International Equity Fund II would have been 1.00% and 2.21%,
respectively.
7. Certain expenses are being absorbed voluntarily by the investment
adviser and sub-adviser. Total expenses (after expenses were absorbed but before
any expense offset arrangement) of the INVESCO VIF - High Yield Portfolio and
INVESCO VIF - Industrial Income Portfolio for the year ended December 31, 1997
amounted to 0.83% and 0.91%, respectively, of each Portfolio's average net
assets. In the absence of such voluntary expense limitation, the total operating
expenses of the INVESCO VIF - High Yield Portfolio and INVESCO VIF - Industrial
Income Portfolio for the fiscal period ended December 31, 1997 would have been
0.94% and 0.97%, respectively, of each Portfolio's average net assets.
It should be noted that the Portfolio's actual expenses were lower than the
figures shown because the Portfolio's custodian fees and pricing expenses were
reduced under expense offset arrangements. However, as a result of an SEC
requirement for mutual funds to state their total operating expenses without
crediting any such expense offsetting arrangements, the figures shown above do
not reflect these reductions.
8. Lazard Asset Management, the Fund's investment adviser, has voluntarily
agreed to reimburse all expenses, including management fees, in excess of 1.50%
of the average annual net assets of the Portfolio.
9. Neuberger & Berman Advisers Management Trust is divided into portfolios
(Portfolios), each of which invests all of its net investable assets in a
corresponding series of Advisers Managers Trust. The figures reported under
"Management Fees" include the total of the administration fees paid by the
Portfolio and the management fees paid by its corresponding series. Similarly,
"Other Expenses" includes all other expenses of the Portfolio and its
corresponding series.
10. Strong Capital Management, Inc., the investment adviser of the Strong
Growth Fund II, has voluntarily agreed to cap the Fund's total operating
expenses at 1.20%. The Adviser has no current intention to, but may in the
future, discontinue or modify any waiver of fees or absorption of expenses at
its discretion with appropriate notification to its shareholders.
11. All figures are annualized. Expenses of the Worldwide Real Estate Fund,
which commenced operation in June 1997, are being assumed by the Fund's
investment adviser. Without such assumption, Worldwide Real Estate Fund's
Management Fee would be 1.00%, Other Expenses would be 3.88% and Total Expenses
would be 4.88%. Other Expenses of Worldwide Real Estate Fund are an estimate
which assumes $80 million in average daily net assets, and may be greater or
less than those shown. Prior to April 30, 1997, Worldwide Hard Assets Fund was
named Gold and Natural Resources Fund. Other Expenses of the Worldwide Hard
Assets Fund are net of soft dollar credits. Without such credits, Other Expenses
would have been 0.18% and Total Annual Portfolio Expenses would have been 1.18%.
Other Expenses of Worldwide Emerging Markets Fund are net of the reduction of
the Fund's operating fees in connection with a fee arrangement, based on cash
balances left on deposit with the custodian, and net of the waiver or assumption
by the Fund's investment adviser of certain fees and expenses. Without such fee
arrangement and, to a lesser extent, the waiver/assumption, Other Expenses would
have been 0.34% and Total Expenses would have been 1.34%. The Fund's investment
adviser is no longer waiving or assuming fees and expenses.
5. DEATH BENEFIT
The primary purpose of the Policy is to provide Death Benefit protection on the
life of the Primary Insured. While the Policy is in force, if the Primary
Insured dies, the Beneficiary(ies) will receive the Death Proceeds. The Death
Proceeds equal the Death Benefit under the Policy less any Indebtedness.
The amount of the Death Benefit depends upon the Specified Amount and Your
Policy's Accumulation Value on the date of the Primary Insured's death, and the
Death Benefit Option in effect at the time of death.
The Policy provides two Death Benefit options: a Level Death Benefit and an
Adjustable Death Benefit. So long as the Policy remains in force, the Death
Benefit under either option will never be less than the Specified Amount.
LEVEL DEATH BENEFIT OPTION. The amount of the Death Benefit under the Level
Death Benefit Option is the greater of:
1. the Specified Amount on the date of death; or
2. the Accumulation Value on the date of death multiplied by the
applicable factor from the Table of Minimum Death Benefit
Corridor Percentages shown below.
ADJUSTABLE DEATH BENEFIT OPTION. The amount of the Death Benefit under the
Adjustable Death Benefit Option is the greater of:
1. the Specified Amount on the date of death plus the Accumulation Value
on the date of death; or
2. the Accumulation Value on the date of death multiplied by the
applicable factor from the Table of Minimum Death Benefit Corridor
Percentages shown below.
The applicable percentage is a percentage that is based on the attained Age of
the Primary Insured at the beginning of the Policy Year and is equal to the
following:
Attained Corridor Attained Corridor
Age Percentage Age Percentage
--- ---------- --- ----------
0-40 250% 60 130%
41 243% 61 128%
42 236% 62 126%
43 229% 63 124%
44 222% 64 122%
45 215% 65 120%
46 209% 66 119%
47 203% 67 118%
48 197% 68 117%
49 191% 69 116%
50 185% 70 115%
51 178% 71 113%
52 171% 72 111%
53 164% 73 109%
54 157% 74 107%
55 150% 75-90 105%
56 146% 91 104%
57 142% 92 103%
58 138% 93 102%
59 134% 94 101%
95-100 100%
CHANGE IN DEATH BENEFIT OPTION
You may change the Death Benefit option after the Policy has been in force for
at least one year, subject to the following:
1. You must submit an Authorized Request;
2. once the Death Benefit option has been changed, it cannot be
changed again for one year from the date of the change;
3. if the Level Death Benefit Option is to be changed to the
Adjustable Death Benefit Option, You must submit proof
satisfactory to Us that the Primary Insured is still insurable;
4. if the Level Death Benefit Option is changed to the Adjustable
Death Benefit Option the resulting Specified Amount can never be
less than 50% of the Minimum Specified Amount. The Specified
Amount will be reduced to equal the Specified Amount less the
Accumulation Value on the date of change. This decrease will not
result in any decrease in Premiums or Surrender Charges; and
5. if the Adjustable Death Benefit Option is changed to the Level
Death Benefit Option, the Specified Amount will be increased by
an amount equal to the Accumulation Value on the date of the
change. This increase will not result in any increase in Premiums
or Surrender Charges.
Any change in a Death Benefit option will take effect on the Monthly Anniversary
Date on or following the date We approve the request for the change.
CHANGE IN SPECIFIED AMOUNT
You may change the Specified Amount of the Policy effective on any Monthly
Anniversary Day after the Policy has been in force at least one year, subject to
the following requirements. Once the Specified Amount has been changed, it
cannot be changed again for one year from the date of a change.
SPECIFIED AMOUNT INCREASE. To increase the Specified Amount You must:
1. submit an application for the increase;
2. submit proof satisfactory to Us that the Primary Insured is an
insurable risk; and
3. pay any additional Premium which is required.
The Specified Amount can only be increased before the Primary Insured reaches
Age 80. A Specified Amount increase will take effect on the Monthly Anniversary
Day on or following the day We approve the application for the increase. The
Specified Amount increase must be for at least $10,000. Each increase will have
its own Surrender Charge based on the increased issue Age, sex and Rate Class.
The Rate Class that applies to any Specified Amount increase may be different
from the Rate Class that applies to the Initial Specified Amount. Each increase
will have its own Cost of Insurance rate.
The following changes will be made to reflect the increase:
1. the No-Lapse Monthly Minimum Premium will be increased;
2. an additional Surrender Charge for the increase in Specified
Amount will apply.
We will furnish You with documentation showing You any change in Rate Class for
the Specified Amount increase, the amount of the increase and the additional
Surrender Charges.
SPECIFIED AMOUNT DECREASE. You must request by Authorized Request any
decrease in the Specified Amount. The decrease will take effect on the later
of:
1. the Monthly Anniversary Day on or following the day We receive
Your request for the decrease; or
2. the Monthly Anniversary Day one year after the last change in
Specified Amount was made.
A Specified Amount decrease will be used to reduce any previous increases to the
Specified Amount which are then in effect starting with the latest increase and
continuing in the reverse order in which the increases were made. If any portion
of the decrease is left over after all Specified Amount increases have been
reduced to zero, it will be used to reduce the Initial Specified Amount. We will
not permit a Specified Amount decrease that would reduce the Specified Amount
below the Minimum Specified Amount. The applicable Surrender Charge for the
amount of decrease will be deducted from the Accumulation Value.
The No-Lapse Monthly Minimum Premium will be reduced to reflect the Specified
Amount decrease.
GUARANTEED MINIMUM DEATH BENEFIT
You can elect to have a Guaranteed Minimum Death Benefit Rider added to Your
Policy. This rider guarantees that the Death Benefit under Your Policy will
never be less than the Specified Amount during the Guaranteed Minimum Death
Benefit (GMDB) period provided that the GMDB payment requirement has been met.
The GMDB Period is determined for each issue Age in accordance with the
following:
Issue Age GMDB Period
--------- -----------
20-35 25 years
36-50 to age 60
51-55 10 years
56-59 to age 65
There is no separate charge for this rider but in order to have the GMDB
provided by the rider You must pay a certain level of Premiums each month which
is greater than the No-Lapse Monthly Minimum Premium. The GMDB payment
requirement is that the sum of all premiums paid less any partial surrenders and
less any Indebtedness are at least as large as the sum of the GMDB monthly
Premiums since the Policy Date. The payment requirement for the GMDB rider must
be met on each Monthly Anniversary Day even though Premiums do not need to be
paid monthly. The GMDB Monthly Premium is determined by the Primary Insured's
issue Age, sex and Rate Class and includes all rider costs. Ask Your Registered
Representative for the particulars to Your own situation.
ACCELERATED DEATH BENEFIT
If the Primary Insured is terminally ill, under the Accelerated Death Benefit
rider, We will pre-pay a portion of the Death Benefit. You may elect to have an
Accelerated Death Benefit. You can only elect this benefit one time, regardless
if the amount You selected. No premium is charged for this rider.
You can choose an amount between 10% and 50% of the Specified Amount. The
maximum benefit amount is the greater of $250,000 and 10% of the Specified
Amount. The remaining amount of the Specified Amount in Your Policy must be at
least equal to 50% of the Minimum Specified Amount.
Benefits as specified under the Policy will be reduced upon receipt of an
Accelerated Death Benefit amount. Receipt of an Accelerated Death Benefit amount
may be taxable. You should contact Your personal tax or financial adviser for
specific information.
After an Accelerated Death Benefit payment is made, the Policy will remain in
force and reduced Premiums will be payable. The Policy's Specified Amount,
Accumulation Value and Surrender Charge will be reduced by the percentage of the
requested portion of the available amount as specified in the rider. Any
outstanding Loan will be reduced by the portion of the Loan and repaid by the
same percentage as the Accelerated Death Benefit percentage as described in the
rider.
The receipt of an Accelerated Death Benefit amount may adversely affect the
recipient's eligibility for Medicaid or other government benefits or
entitlements.
The amount available will be reduced by, an interest charge and any repayment of
Indebtedness. The interest charge is based on the same interest charge as is
used to determine loans.
6. TAXES
NOTE: BMA HAS PREPARED THE FOLLOWING INFORMATION ON FEDERAL INCOME TAXES AS A
GENERAL DISCUSSION OF THE SUBJECT. IT IS NOT INTENDED AS TAX ADVICE TO ANY
PERSON. YOU SHOULD CONSULT YOUR OWN TAX ADVISER ABOUT YOUR OWN CIRCUMSTANCES.
BMA HAS INCLUDED IN PART II AN ADDITIONAL DISCUSSION REGARDING TAXES.
LIFE INSURANCE IN GENERAL
Life insurance, such as this Policy, is a means of providing for death
protection and setting aside money for future needs. Congress recognized the
importance of such planning and provided special rules in the Internal Revenue
Code (Code) for life insurance.
Simply stated, these rules provide that You will not be taxed on the earnings on
the money held in Your life insurance policy until You take the money out.
Beneficiaries generally are not taxed when they receive the Death Proceeds upon
the death of the Primary Insured.
TAKING MONEY OUT OF YOUR POLICY
You, as the Owner, will not be taxed on increases in the value of Your Policy
until a distribution occurs either as a surrender or as a loan. If Your Policy
is a MEC any loans or withdrawals from the Policy will be treated as first
coming from earnings and then from Your investment in the Policy. Consequently,
these earnings are included in taxable income.
The Internal Revenue Code also provides that any amount received from a MEC
which is included in income may be subject to a 10% penalty. The penalty will
not apply if the income received is: (1) paid on or after the taxpayer reaches
age 59 1/2; (2) paid if the taxpayer becomes totally disabled (as that term is
defined in the Code); or (3) in a series of substantially equal payments made
annually (or more frequently) for the life or life expectancy of the taxpayer.
If Your Policy is not a MEC, any surrender proceeds will be treated as first a
recovery of the investment in the Policy and to that extent will not be included
in taxable income. Furthermore any loan will be treated as indebtedness under
the Policy and not as a taxable distribution. See "Tax Status" in Part II for
more details.
DIVERSIFICATION
The Code provides that the underlying investments for a variable life policy
must satisfy certain diversification requirements in order to be treated as a
life insurance contract. We believe that the Investment Options are being
managed so as to comply with such requirements.
Under current federal tax law, it is unclear as to the circumstances under which
You, because of the degree of control You exercise over the underlying
investments, and not Us would be considered the Owner of the shares of the
Investment Options. If You are considered the Owner of the investments, it will
result in the loss of the favorable tax treatment for the Policy. It is unknown
to what extent owners are permitted to select Investment Options, to make
transfers among the Investment Options or the number and type of Investment
Options Owners may select from. If guidance from the Internal Revenue Service is
provided which is considered a new position, then the guidance would generally
be applied prospectively. However, if such guidance is considered not to be a
new position, it may be applied retroactively. This would mean that You, as the
Owner of the Policy, could be treated as the Owner of the investment portfolios.
Due to the uncertainty in this area, BMA reserves the right to modify the Policy
in an attempt to maintain favorable tax treatment.
7. ACCESS TO YOUR MONEY
LOANS
We will loan You money while the Policy is in force and not in a Grace Period,
with the Policy as the sole security. We will advance a loan amount not to
exceed the loan value. The loan must be secured by proper assignment of the
Policy. We may defer granting loans but not for more than six months.
The Accumulation Value securing the loan is transferred to the Loan Account on a
pro-rata basis. The amount transferred from each Investment Option and the Fixed
Account will equal the ratio of the value each bears to the total unloaned
Accumulation Value. If You desire other than the above, You may specify the
specific Investment Option from which the transfer is to be made.
Any Indebtedness will be deducted from any amount payable under the Policy.
No new loan may be taken which, in combination with existing loans and accrued
interest, is greater than the Loan Value.
EFFECT OF A LOAN. A Policy loan will result in Accumulation Value being
transferred from the Investment Options or the Fixed Account to the Loan
Account. A Policy Loan, whether or not unpaid, will have a permanent effect on
the death benefits and Policy values, because the amount of the Policy Loan
transferred to the Loan Account will not share in the investment results of the
Investment Options while the Policy Loan is outstanding. If the Loan Account
earnings rate is less than the investment performance of the selected Investment
Options and/or the Fixed Account, the values and benefits under the Policy will
be reduced as a result of the Policy Loan. Furthermore, if not repaid, the
Policy Loan will reduce the amount of Death Benefit and Cash Surrender Value.
LOAN VALUE. The loan value is equal to 90% of the Accumulation Value as of
the date the Authorized Request for the loan is received at the BMA Service
Center less: (a) an amount equal to the Surrender Charge, if any, that applies
if the Policy is surrendered in full; (b) any existing Indebtedness; (c)
interest on all Indebtedness on the Policy to the next Policy Anniversary; and
(d) prior to the ninth Policy Month, an amount equal to the balance of the
Monthly Deductions for the first Policy Year; or (e) on or after the ninth
Policy Month, an amount equal to the sum of the next three Monthly Deductions.
LOAN INTEREST (CHARGED). Interest is payable in advance on the first
interest payment due date and on each Policy Anniversary that follows at the
loan interest rate which is shown on Your Policy Schedule. The interest rate
applies to the unpaid balance of the loan. The first interest payment is due on
the date of the loan.
If loan interest is not paid, the difference between the value of the Loan
Account and the Indebtedness will be transferred from the Investment Options and
the Fixed Account on a pro-rata basis to the Loan Account.
INTEREST CREDITED. The Accumulation Value in the Loan Account will earn
interest at a rate not less than 4%. For Policy Years 11 and after, the
Accumulation Value in the Loan Account will earn interest at the Loan Interest
Rate.
LOAN REPAYMENT. Loans may be repaid at any time while the Policy is in
force. There is no minimum loan repayment amount. The amount equivalent to a
loan repayment will be deducted from the Loan Account and allocated to the
originating Investment Options and the Fixed Account in the same percentage as
was used for the transfers to the Loan Account.
AMOUNTS RECEIVED BY US WILL BE APPLIED AS PREMIUMS UNLESS WE ARE OTHERWISE
INSTRUCTED TO APPLY SUCH AMOUNTS AS REPAYMENT OF THE LOAN.
TERMINATION FOR MAXIMUM INDEBTEDNESS. The Policy will terminate when
Indebtedness equals or exceeds the Accumulation Value less the Surrender Charge,
if any, that applies if the Policy is surrendered in full. Termination will be
effective 61 days after We send notice of the termination to Your last known
address and the last known address of any assignee of record. A termination of
the Policy may have Federal income tax consequences. (See Part II - Federal Tax
Status - Tax Treatment of Loans and Surrenders).
SURRENDERS
TOTAL SURRENDER. You may terminate the Policy at any time by submitting
an Authorized Request to the BMA Service Center. We will pay the Cash Surrender
Value to You as of the Business Day the Authorized Request is received in good
order and Our liability under the Policy will cease. A Surrender Charge may be
assessed.
PARTIAL SURRENDER. After the first Policy Year, You may surrender a
part of the Cash Surrender Value by submitting an Authorized Request to the BMA
Service Center. All partial surrenders are subject to the following:
1. a partial surrender must be for at least $250.
2. unless You specify otherwise, the partial surrender will be
deducted on a pro-rata basis from the Fixed Account and the
Investment Options; the Surrender Charge and the Partial
Surrender Charge are also deducted from the Accumulation Value;
You may specify if a different allocation method is to be used;
however the proportion to be taken from the Fixed Account may
never be greater than the Fixed Account's proportion of the total
unloaned Accumulation Value.
3. You cannot replace the surrendered Cash Surrender Value.
4. upon a partial surrender, the Specified Amount may be reduced if
the Level Death Benefit Option is in effect. The Specified Amount
will not be reduced if the Adjustable Death Benefit Option is in
effect. The Specified Amount will be reduced by the amount of the
partial surrender if the Policy is not in corridor. (A Policy is
in corridor if the Accumulation Value exceeds certain specified
percentages as set forth in the Internal Revenue Code.)
5. a partial surrender is allowed twice each Policy Year and will be
limited to such amounts so that the partial surrender will not
reduce the Specified Amount below the Minimum Specified Amount,
or reduce the remaining Cash Surrender Value below $500.
6. a pro-rata portion of the Surrender Charge is assessed for any
amount by which the Specified Amount is reduced. A Partial
Surrender Fee also applies.
8. OTHER INFORMATION
BMA
Business Men's Assurance Company of America ("BMA" or the "Company"), BMA Tower,
700 Karnes Blvd., Kansas City, Missouri, 64108 was incorporated in 1909 under
the laws of the state of Missouri. BMA is licensed to do business in the
District of Columbia, Puerto Rico and all states except New York. BMA operates
as a Reinsurer in the state of New York. BMA is a wholly owned subsidiary of
Assicurazioni Generali S.p.A., which is the largest insurance organization in
Italy.
YEAR 2000
Some of BMA's computer systems were written using two digits rather than four to
define the applicable year. As a result, those computer systems will not
recognize the year 2000 which, if not corrected, could cause disruptions of
operations, including, among other things, an inability to process transactions
or engage in similar normal business activities.
BMA has developed a plan to modify its information technology to be ready for
the year 2000 and has begun converting critical data processing systems. BMA
currently expects the project to be substantially complete by late 1998 which is
prior to any anticipated impact on its operating systems. Based on this plan,
BMA does not believe that the costs to complete such system modifications or
replacement will be material to BMA.
THE SEPARATE ACCOUNT
We have established a separate account, BMA Variable Life Account A (Separate
Account), to hold the assets that underlie the Policies.
The assets of the Separate Account are being held in Our name on behalf of the
Separate Account and legally belong to Us. However, those assets that underlie
the Policies, are not chargeable with liabilities arising out of any other
business We may conduct. All the income, gains and losses (realized and
unrealized) resulting from those assets are credited to or charged against the
Policies and not against any other Policies We may issue.
DISTRIBUTORS
Jones & Babson, Inc., 700 Karnes Boulevard, Kansas City, Missouri 64108 and
Conseco Equity Sales, Inc., 11815 N. Pennsylvania Street, Carmel, Indiana 46032
act as the co-distributors of the Policies. Jones & Babson, Inc. and Conseco
Equity Sales, Inc. will each distribute the Policy in different markets through
their own distribution systems. Jones & Babson, Inc. was organized under the
laws of the state of Missouri on February 23, 1959. Conseco Equity Sales, Inc.
was organized under the laws of the state of Texas on July 12, 1965. Jones &
Babson, Inc., and Conseco Equity Sales, Inc. are both members of the National
Association of Securities Dealers, Inc. Jones & Babson, Inc. is a wholly owned
subsidiary of BMA. Conseco Equity Sales, Inc. is not affiliated with BMA.
The Policy will be sold by individuals who, in addition to being licensed as
life insurance agents for BMA, are also National Association of Securities
Dealers (NASD) registered representatives. These persons will receive
compensation for this sale.
BMA has entered into a reinsurance arrangement with Great American Reserve
Insurance Company ("Great American Reserve") whereby Great American Reserve will
reinsure a portion of the risks associated with the Policy. Conseco Equity
Sales, Inc. is an affiliate of Great American Reserve.
ADMINISTRATION
We have hired NAVISYS (formerly GENELCO, Incorporated), 9735 Landmark Parkway
Drive, St. Louis, Missouri to perform certain administrative services regarding
the Policies. The administrative services include issuance of the Policy and
maintenance of Policy records. Claims are handled jointly between BMA and
NAVISYS.
SUSPENSION OF PAYMENTS OR TRANSFERS
We may be required to suspend or postpone any payments or transfers for any
period when:
1. the New York Stock Exchange is closed (other than customary weekend
and holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of the
Investment Options is not reasonably practicable or BMA cannot
reasonably value the shares of the Investment Options;
4. during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of owners.
We may defer the portion of any transfer, amount payable or surrender, or Policy
Loan from the Fixed Account for not more than six months
OWNERSHIP
OWNER. You, as the Owner of the Policy, have all of the rights under
the Policy. If You die while the Policy is still in force and the Primary
Insured is living, ownership passes to a successor Owner or if none, then Your
estate becomes the Owner.
JOINT OWNER. The Policy can be owned by Joint Owners. Authorization
of both Joint Owners is required for all Policy changes except for telephone
transfers.
BENEFICIARY. The Beneficiary is the person(s) or entity You name to
receive any Death Proceeds. The Beneficiary is named at the time the Policy is
issued unless changed at a later date. Unless an irrevocable Beneficiary has
been named, You can change the Beneficiary at any time before the insured dies.
If there is an irrevocable Beneficiary, all Policy changes except Premium
allocations and transfers require the consent of the Beneficiary.
ASSIGNMENT. You can assign the Policy.
PART II
EXECUTIVE OFFICERS AND DIRECTORS OF BMA
The directors and executive officers of BMA and their business experience for
the past five years are as follows:
Name and Principal Positions and Offices with Depositor and
Business Address * Business Experience for the Past Five Years
- ------------------ -------------------------------------------
Giorgio Balzer Director, Chairman of the Board and
Chief Executive Officer of BMA; U.S.
Representative - Generali - US Branch.
Robert Thomas Rakich Director, President and Chief Operating
Officer of BMA from 1995 to present; President
and Chief Executive Officer, Laurentian
Capital Corp., 1988 to October, 1995.
Dennis Keith Cisler Senior Vice President - Information
Systems of BMA from 1991 - present.
David Lee Higley Senior Vice President and Chief Financial
Officer of BMA from 1989 - present.
Stephen Stanley Soden Senior Vice President - Financial Group from
1994 to present; President & Executive Vice
President from 1985 to 1996, BMA Financial
Services, Inc.
Michael Kent Deardorff Vice President - BMA Financial Group
Marketing from 1996 - present; Vice
President Annuity from 1994 to 1996;
Vice President - Advance Markets from
1990 to 1994.
James Evan Kilmer Vice President of BMA - Taxes.
Edward Scott Ritter Senior Vice President - Corporate Development
of BMA from 1998 to present; Vice President
from 1990 to 1998.
David Allen Gates Vice President and General Counsel of BMA
from 1998 to present; Regulatory Affairs
Vice President from 1991 to 1998.
Martin Jefferson Fuller Senior Vice President - Insurance Distribution
of BMA from 1996 to present; Vice President-
Sales Employee Benefits Division from 1993
to 1996.
Robert Noel Sawyer Senior Vice President and Chief Investment
Officer of BMA from 1990 to present.
Vernon Wirt Voorhees II Director, Senior Vice President - Corporate
Services and Secretary of BMA since 1995;
Senior Vice President - Corporate Services
and Secretary 1990 to present; Senior Vice
President - Finance 1983-1990.
Margaret Mary Heidkamp Vice President - Operations, Variable and
Accumulation Products of BMA from 1998 to
present; Vice President, Management
Services from 1986 to 1998.
Jay Brian Kinnamon Vice President and Corporate Actuary of BMA
from 1991 to present.
Susan Annette Sweeney Vice President - Treasurer & Controller of BMA
from 1995 to present; Chief Financial
Officer - Dean Machinery 1995; Manager of
Finance - Jackson County, Missouri from
1991 to 1995.
Gerald Wayne Selig Vice President and Actuary - Accumulation
Products of BMA from 1998 to present; Actuary-
Accumulation Products from 1996 to 1998;
Actuary - Qualified Plan Services from
1989 to 1996.
Thomas Morton Bloch Director of BMA since 1993; Teacher, St.
Francis Xavier School from August 1995 to
present; President and Chief Executive Officer
-H & R Block, Inc. until 1995.
Gianguido Castagno Director of BMA since 1990; Vice President-
Head of Valuations Department-Assicurazioni
Generali, S.p.A., Trieste, Italy; Vice
President-Head of Corporate Operations Control
Department to December 1997 - Assicurazioni
Generali.
William Thomas Grant II Director of BMA since 1990; President and
Chief Executive Officer, Chairman of the Board
-Labone, from 1997 to present; Chairman and
Chief Executive Officer Seafield Capital
Corporation from 1993 to 1997.
Donald Joyce Hall, Jr. Director of BMA since 1990; Hallmark Vice
President-Creative - Hallmark Cards, Inc.;
Hallmark Vice President - Product Development
-Hallmark; Hallmark Vice President - Creative
-Hallmark; General Manager - Keepsakes -
Hallmark; Executive Assistant to Executive
Vice President-Hallmark; Director, Specialty
Store Development-Hallmark.
Allan Drue Jennings Director of BMA since 1990; Chairman of the
Board, President and Chief Executive Officer -
Kansas City Power & Light Company.
David Woods Kemper Director of BMA since 1991; Chairman of the
Board, President and Chief Executive officer -
Commerce Bancshares, Inc.
Giorgio Liveris Director of BMA since 1990; Head of Life
Branch-Assicurazioni Generali, S.p.A.,
Trieste, Italy.
John Kessander Lundberg Director of BMA since 1990; Retired.
John Pierre Mascotte Director of BMA since 1990; President and
Chief Executive Officer - Blue Cross Blue
Shield of Kansas City, Chairman -Johnson &
Higgins of Missouri, Inc.; Chairman and Chief
Executive Officer - The Continental
Corporation.
Giovanni Perissinotto Director of BMA since 1990; Manager of the
Accounting and Investment Department -
Assicurazioni Generali, S.p.A., Trieste,
Italy; General Manager - Assicurazioni
Generali - 1997; Deputy General Manager,
Assicurazioni Generali - 1996; Manager
of the Accounting and Investment Department -
Assicurazioni Generali - 1995; Joint
Manager of the Accounting and Investment
Department - Assicurazioni Generali - 1993.
* Principal Business Address is BMA Tower, 700 Karnes Blvd., Kansas City, MO
64108-3306
OFFICERS AND DIRECTORS OF JONES & BABSON, INC.
As of July 31, 1998, the following are the officers and directors of Jones &
Babson, Inc. and their position with Jones & Babson, Inc.
Name and Principal
Business Address * Position with Jones & Babson, Inc.
- ------------------ -------------------------------------------
Larry D. Armel President, Director and Chief Executive
Officer
P. Bradley Adams Vice President, Chief Financial Officer
and Treasurer
Michael A. Brummel Vice President, Assistant Secretary and
Assistant Treasurer
Martin A. Cramer Vice President and Secretary
John G. Dyer Assistant Secretary and Legal Counsel
Constance B. Martin Assistant Vice President
Roy M. Moura Vice President
Stephen S. Soden Chairman of the Board and Director
Giorgio Balzer Director
Robert T. Rakich Director
Edward S. Ritter Director
Robert N. Sawyer Director
Vernon W. Voorhees II Director
*Principal business address is 700 Karnes Boulevard, Kansas City, Missouri
64108-3306.
OFFICERS AND DIRECTORS OF CONSECO EQUITY SALES, INC.
As of July 31, 1998, the following are the officers and directors of Conseco
Equity Sales, Inc. and their position with Conseco Equity Sales, Inc.
Name and Principal
Business Address * Position with Conseco Equity Sales, Inc.
- ------------------ -------------------------------------------
L. Gregory Gloeckner President and Director
William P. Latimer Vice President, Senior Counsel, Secretary
and Director
James S. Adams Senior Vice President, Treasurer and
Director
William T. Devanney, Jr. Senior Vice President, Corporate Taxes
Christene H. Darnell Vice President, Management Reporting
Lisa M. Zimmerman Assistant Vice President, Corporate Taxes
Christine E. Monical Second Vice President and Assistant
General Counsel
*Principal Business Address is 11815 N. Pennsylvania Street, Carmel, Indiana
46032.
VOTING
In accordance with Our view of present applicable law, We will vote the shares
of the Investment Options at special meetings of shareholders in accordance with
instructions received from Owners having a voting interest. We will vote shares
for which We have not received instructions in the same proportion as We vote
shares for which We have received instructions. We will vote shares We own in
the same proportion as We vote shares for which We have received instructions.
The funds do not hold regular meetings of shareholders.
If the Investment Company Act of 1940 or any regulation thereunder should be
amended or if the present interpretation thereof should change, and as a result
We determine that it is permitted to vote the shares of the funds in Our own
right, We may elect to do so.
The voting interests of the Owner in the funds will be determined as follows:
Owners may cast one vote for each $100 of Accumulation Value of a Policy which
is allocated to an Investment Option on the record date. Fractional votes are
counted.
The number of shares which a person has a right to vote will be determined as of
the date to be chosen by Us not more than sixty (60) days prior to the meeting
of the fund. Voting instructions will be solicited by written communication at
least fourteen (14) days prior to such meeting.
Each Owner having such a voting interest will receive periodic reports relating
to the Investment Options in which he or she has an interest, proxy material and
a form with which to give such voting instructions.
DISREGARD OF VOTING INSTRUCTIONS. We may, when required to do so by
state insurance authorities, vote shares of the funds without regard to
instructions from Owners if such instructions would require the shares to be
voted to cause an Investment Option to make, or refrain from making, investments
which would result in changes in the sub-classification or investment objectives
of the Investment Option. We may also disapprove changes in the investment
policy initiated by Owners or trustees of the funds, if such disapproval is
reasonable and is based on a good faith determination by Us that the change
would violate state or federal law or the change would not be consistent with
the investment objectives of the Investment Options or which varies from the
general quality and nature of investments and investment techniques used by
other funds with similar investment objectives underlying other variable
contracts offered by Us or of an affiliated company. In the event We do
disregard voting instructions, a summary of this action and the reasons for such
action will be included in the next semi-annual report to Owners.
LEGAL OPINIONS
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided advice on
certain matters relating to the Federal securities and income tax laws in
connection with the Policies.
REDUCTION OR ELIMINATION OF SURRENDER CHARGE
The amount of the Surrender Charge on the Policies may be reduced or eliminated
when sales of the Policies are made to individuals or to a group of individuals
in a manner that results in savings of sales expenses. The entitlement to a
reduction of the Surrender Charge will be determined by Us after examination of
all the relevant factors such as:
1. The size and type of group to which sales are to be made will be
considered. Generally, the sales expenses for a larger group are less than for a
smaller group because of the ability to implement large numbers of Policies with
fewer sales contacts.
2. The total amount of Premiums to be received will be considered. Per
Policy sales expenses are likely to be less on larger Premium payments than on
smaller ones.
3. Any prior or existing relationship with Us will be considered. Per
Policy sales expenses are likely to be less when there is a prior existing
relationship because of the likelihood of implementing the Policy with fewer
sales contacts.
4. There may be other circumstances, of which We are not presently aware,
which could result in reduced sales expenses.
If, after consideration of the foregoing factors, We determine that there will
be a reduction in sales expenses, We may provide for a reduction or elimination
of the Surrender Charge.
The Surrender Charge may be eliminated when the Policies are issued to an
officer, director or employee of BMA or any of Our affiliates. In no event will
any reduction or elimination of the Surrender Charge be permitted where the
reduction or elimination will be unfairly discriminatory to any person.
NET AMOUNT AT RISK
LEVEL DEATH BENEFIT. For the Level Death Benefit Option, the Net Amount at
Risk is the greater of:
1. the Specified Amount divided by 1.0032737 less the Accumulation
Value; and
2. the Accumulation Value times the applicable Minimum Death Benefit
Corridor Percentage (shown in Part 2 Section 5 Death Benefit)
divided by 1.0032737, less the Accumulation Value.
ADJUSTABLE DEATH BENEFIT OPTION. For the Adjustable Death Benefit Option,
the Net Amount at Risk is the greater of:
1. the Specified Amount plus the Accumulation Value divided by
1.0032737, less the Accumulation Value, and
2. the Accumulation Value times the applicable Minimum Death Benefit
Corridor Percentage divided by 1.0032737, less the Accumulation
Value.
MATURITY DATE
The Policy provides that We will pay the Accumulation Value of the Policy, less
Indebtedness, to You on the Maturity Date if the Primary Insured is then living.
Unless an extension is requested, the Maturity Date will be the Policy
Anniversary Date nearest the Primary Insured's 100th birthday.
At any time within the twelve calendar months prior to the Maturity Date, You
may request that the Maturity Date be extended through the Extension of Maturity
Date Rider. If We received Your written request prior to the Maturity Date and
all past due Monthly Deductions have been paid, the Policy will continue in
force beyond the Maturity Date until the earlier of the death of the Primary
Insured or the date that We receive Your request to surrender the Policy.
No rider will be extended past the original Policy Maturity Date.
Once the Maturity Date extension is in place, the Death Benefit will be the
Accumulation Value, less any Indebtedness. The Monthly Deduction will no longer
be deducted and no new Premiums will be accepted. Interest or loans, if any,
will continue to accrue and will be added to the total Indebtedness.
Loan repayments will be accepted.
There is no charge for this rider.
MISSTATEMENT OF AGE OR SEX
The age of the Primary Insured is the Age nearest the Primary Insured's birthday
on the Policy Date or Policy Anniversary, determined from the date of birth
shown in the application. If the date of birth or sex shown on the Policy
Schedule is not correct, the Death Benefit will be adjusted to that which would
be purchased by the most recent cost of insurance charge at the correct date of
birth and sex.
OUR RIGHT TO CONTEST
We cannot contest the validity of the Policy except in the case of fraud after
it has been in effect during the Primary Insured's lifetime for two years from
the Policy Date. If the Policy is reinstated, the two-year period is measured
from the date of reinstatement. In addition, if the Primary Insured commits
suicide in the two-year period, or such period as specified in state law, the
benefit payable will be limited to Premiums paid less loans and less any
surrenders.
PAYMENT OPTIONS
The Death Proceeds may be paid in a lump sum or may be applied to one of the
following Payment Options:
Option 1- Life Annuity
Option 2- Life Annuity with 120 or 240 Monthly Annuity Payments
Guaranteed
Option 3- Joint and Last Survivor Annuity
Option 4- Joint and Last Survivor Annuity with 120 or 240
Monthly Annuity Payments Guaranteed.
You or the Beneficiary can select to have the Payment Options payable on either
a fixed or variable basis.
FEDERAL TAX STATUS
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON BMA'S UNDERSTANDING OF CURRENT
FEDERAL INCOME TAX LAW APPLICABLE TO LIFE INSURANCE IN GENERAL. BMA CANNOT
PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE. PURCHASERS
ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE POSSIBILITY OF SUCH
CHANGES. SECTION 7702 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED ("CODE"),
DEFINES THE TERM "LIFE INSURANCE CONTRACT" FOR PURPOSES OF THE CODE. BMA
BELIEVES THAT THE POLICIES TO BE ISSUED WILL QUALIFY AS "LIFE INSURANCE
CONTRACTS" UNDER SECTION 7702. BMA DOES NOT GUARANTEE THE TAX STATUS OF THE
POLICIES. PURCHASERS BEAR THE COMPLETE RISK THAT THE POLICIES MAY NOT BE TREATED
AS "LIFE INSURANCE" UNDER FEDERAL INCOME TAX LAWS. PURCHASERS SHOULD CONSULT
THEIR OWN TAX ADVISERS. IT SHOULD BE FURTHER UNDERSTOOD THAT THE FOLLOWING
DISCUSSION IS NOT EXHAUSTIVE AND THAT SPECIAL RULES NOT DESCRIBED IN THIS
PROSPECTUS MAY BE APPLICABLE IN CERTAIN SITUATIONS.
INTRODUCTION. The discussion contained herein is general in nature and
is not intended as tax advice. Each person concerned should consult a competent
tax adviser. No attempt is made to consider any applicable state or other tax
laws. Moreover, the discussion herein is based upon Our understanding of current
federal income tax laws as they are currently interpreted. No representation is
made regarding the likelihood of continuation of those current federal income
tax laws or of the current interpretations by the Internal Revenue Service.
BMA is taxed as a life insurance company under the Code. For federal income tax
purposes, the Separate Account is not a separate entity from BMA and its
operations form a part of BMA.
DIVERSIFICATION. Section 817(h) of the Code imposes certain
diversification standards on the underlying assets of variable life insurance
policies. The Code provides that a variable life insurance policy will not be
treated as life insurance for any period (and any subsequent period) for which
the investments are not, in accordance with regulations prescribed by the United
States Treasury Department ("Treasury Department"), adequately diversified.
Disqualification of the Policy as a life insurance contract would result in
imposition of federal income tax to the Owner with respect to earnings allocable
to the Policy prior to the receipt of payments under the Policy. The Code
contains a safe harbor provision which provides that life insurance policies
such as these Policies meet the diversification requirements if, as of the close
of each quarter, the underlying assets meet the diversification standards for a
regulated investment company and no more than fifty-five (55%) percent of the
total assets consist of cash, cash items, U.S. Government securities and
securities of other regulated investment companies. There is an exception for
securities issued by the U.S. Treasury in connection with variable life
insurance policies.
On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg.
Section 1.817-5), which established diversification requirements for the
investment portfolios underlying variable contracts such as the Policies. The
Regulations amplify the diversification requirements for variable contracts set
forth in the Code and provide an alternative to the safe harbor provision
described above. Under the Regulations, an investment portfolio will be deemed
adequately diversified if: (i) no more than 55% of the value of the total assets
of the portfolio is represented by any one investment; (ii) no more than 70% of
the value of the total assets of the portfolio is represented by any two
investments; (iii) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (iv) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments. For purposes of these Regulations, all securities of the same
issuer are treated as a single investment.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer".
BMA intends that each Investment Option underlying the Policies will be managed
by the managers in such a manner as to comply with these diversification
requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
Owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Policy. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of Owner control which may be exercised under the Policy is different
in some respects from the situations addressed in published rulings issued by
the Internal Revenue Service in which it was held that the policy Owner was not
the Owner of the assets of the separate account. It is unknown whether these
differences, such as the owner's ability to transfer among investment choices or
the number and type of investment choices available, would cause the Owner to be
considered as the Owner of the assets of the Separate Account.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Owner being
retroactively determined to be the Owner of the assets of the Separate Account.
Due to the uncertainty in this area, BMA reserves the right to modify the Policy
in an attempt to maintain favorable tax treatment.
TAX TREATMENT OF THE POLICY. The Policy has been designed to comply
with the definition of life insurance contained in Section 7702 of the Code.
Although some interim guidance has been provided and proposed regulations have
been issued, final regulations have not been adopted. Section 7702 of the Code
requires the use of reasonable mortality and other expense charges. In
establishing these charges, BMA has relied on the interim guidance provided in
IRS Notice 88-128 and proposed regulations issued on July 5, 1991. Currently,
there is even less guidance as to a Policy issued on a substandard risk basis
and thus it is even less clear whether a Policy issued on such basis would meet
the requirements of Section 7702 of the Code.
While BMA has attempted to comply with Section 7702, the law in this area is
very complex and unclear. There is a risk, therefore, that the Internal Revenue
Service will not concur with BMA's interpretations of Section 7702 that were
made in determining such compliance. In the event the Policy is determined not
to so comply, it would not qualify for the favorable tax treatment usually
accorded life insurance policies. Owners should consult their tax advisers with
respect to the tax consequences of purchasing the Policy.
POLICY PROCEEDS. The tax treatment accorded to loan proceeds and/or
surrender payments from the Policies will depend on whether the Policy is
considered to be a MEC. (See "Tax Treatment of Loans and Surrenders.")
Otherwise, the Company believes that the Policy should receive the same federal
income tax treatment as any other type of life insurance. As such, the death
benefit thereunder is excludable from the gross income of the Beneficiary under
Section 101(a) of the Code. Also, the Owner is not deemed to be in constructive
receipt of the Cash Surrender Value, including increments thereon, under a
Policy until there is a distribution of such amounts.
Federal, state and local estate, inheritance and other tax consequences of
ownership, or receipt of Policy proceeds, depend on the circumstances of each
Owner or Beneficiary.
TAX TREATMENT OF LOANS AND SURRENDERS. Section 7702A of the Code sets
forth the rules for determining when a life insurance policy will be deemed to
be a MEC. A MEC is a contract which is entered into or materially changed on or
after June 21, 1988 and fails to meet the 7-pay test. A Policy fails to meet the
7-pay test when the cumulative amount paid under the Policy at any time during
the first 7 Policy Years exceeds the sum of the net level premiums which would
have been paid on or before such time if the Policy provided for paid-up future
benefits after the payment of seven (7) level annual premiums. A material change
would include any increase in the future benefits or addition of qualified
additional benefits provided under a policy unless the increase is attributable
to: (1) the payment of premiums necessary to fund the lowest death benefit and
qualified additional benefits payable in the first seven policy years; or (2)
the crediting of interest or other earnings (including policyholder dividends)
with respect to such premiums.
Furthermore, any Policy received in exchange for a Policy classified as a MEC
will be treated as a MEC regardless of whether it meets the 7-pay test. However,
an exchange under Section 1035 of the Code of a life insurance policy entered
into before June 21, 1988 for the Policy will not cause the Policy to be treated
as a MEC if no additional premiums are paid.
Due to the flexible premium nature of the Policy, the determination of whether
it qualifies for treatment as a MEC depends on the individual circumstances of
each Policy.
If the Policy is classified as a MEC, then surrenders and/or loan proceeds are
taxable to the extent of income in the Policy. Such distributions are deemed to
be on a last-in, first-out basis, which means the taxable income is distributed
first. Loan proceeds and/or surrender payments may also be subject to an
additional 10% federal income tax penalty applied to the income portion of such
distribution. The penalty shall not apply, however, to any distributions: (1)
made on or after the date on which the taxpayer reaches age 59 1/2; (2) which is
attributable to the taxpayer becoming disabled (within the meaning of Section
72(m)(7) of the Code); or (3) which is part of a series of substantially equal
periodic payments made not less frequently than annually for the life (or life
expectancy) of the taxpayer or the joint lives (or joint life expectancies) of
such taxpayer and his beneficiary.
If a Policy is not classified as a MEC, then any surrenders shall be treated
first as a recovery of the investment in the Policy which would not be received
as taxable income. However, if a distribution is the result of a reduction in
benefits under the Policy within the first fifteen years after the Policy is
issued in order to comply with Section 7702, such distribution will, under rules
set forth in Section 7702, be taxed as ordinary income to the extent of income
in the Policy.
Any loans from a Policy which is not classified as a MEC, will be treated as
indebtedness of the Owner and not a distribution. Upon complete surrender, if
the amount received plus loan indebtedness exceeds the total premiums paid that
are not treated as previously surrendered by the Policy Owner, the excess
generally will be treated as ordinary income.
Personal interest payable on a loan under a Policy owned by an individual is
generally not deductible. Furthermore, no deduction will be allowed for interest
on loans under Policies covering the life of any employee or officer of the
taxpayer or any person financially interested in the business carried on by the
taxpayer to the extent the indebtedness for such employee, officer or
financially interested person exceeds $50,000. The deductibility of interest
payable on Policy loans may be subject to further rules and limitations under
Sections 163 and 264 of the Code.
Policy Owners should seek competent tax advice on the tax consequences of taking
loans, distributions, exchanging or surrendering any Policy.
MULTIPLE POLICIES. The Code further provides that multiple MEC that are
issued within a calendar year period to the same Owner by one company or its
affiliates are treated as one MEC for purposes of determining the taxable
portion of any loans or distributions. Such treatment may result in adverse tax
consequences including more rapid taxation of the loans or distributed amounts
from such combination of contracts. Policy Owners should consult a tax adviser
prior to purchasing more than one MEC in any calendar year period.
TAX TREATMENT OF ASSIGNMENTS. An assignment of a Policy or the change
of ownership of a Policy may be a taxable event. Policy Owners should therefore
consult competent tax advisers should they wish to assign or change the Owner of
their Policies.
QUALIFIED PLANS. The Policies may be used in conjunction with certain
Qualified Plans. Because the rules governing such use are complex, a purchaser
should not do so until he has consulted a competent Qualified Plans consultant.
INCOME TAX WITHHOLDING. All distributions or the portion thereof which
is includible in gross income of the Policy Owner are subject to federal income
tax withholding. However, the Policy Owner in most cases may elect not to have
taxes withheld. The Policy Owner may be required to pay penalties under the
estimated tax rules, if the Policy Owner's withholding and estimated tax
payments are insufficient.
REPORTS TO OWNERS
We will at a minimum send to each Owner semi-annual and annual reports of the
Investment Options. Within 30 days after each Policy Anniversary, an annual
statement will be sent to each Owner. We may elect to send these more often. The
statement will show the current amount of Death Benefit payable under the
Policy, the current Accumulation Value, the current Cash Surrender Value,
current Loans and will show all transactions previously confirmed. The statement
will also show Premiums paid and all charges deducted during the Policy Year.
Confirmations will be mailed to Policy Owners within seven days of the
transaction of: (a) the receipt of Premium; (b)any transfer between Investment
Options; (c)any loan, interest repayment, or loan repayment; (d)any surrender;
(e) exercise of the free look privilege; and (f) payment of the Death Benefit
under the Policy. Upon request a Policy Owner shall be entitled to a receipt of
Premium payment.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account or the Distributor
is a party or to which the assets of the Separate Account are subject. We are
not involved in any litigation that is of material importance in relation to its
total assets or that relates to the Separate Account.
EXPERTS
The consolidated financial statements of Business Men's Assurance Company of
America at December 31, 1997 and 1996, and for each of the three years in the
period ended December 31, 1997, have been audited by Ernst & Young LLP, 1200
Main Street, Kansas City, Missouri 64106, independent auditors, as set forth in
their report thereon appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
FINANCIAL STATEMENTS
There are no financial statements for the Separate Account because as of the
date of this prospectus it has not yet commenced operations.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Balance Sheets
JUNE 30, 1998 DECEMBER 31, 1997
(UNAUDITED)
---------------------------------------
(In Thousands)
ASSETS
Investments:
Securities available-for-sale, at fair value:
Fixed maturities (amortized cost - $1,200,870 in 1998
and $1,308,458 in 1997) $1,219,618 $1,326,018
Equity securities (cost - $53,381 in 1998 and $46,807 in
1997) 61,438 57,806
Mortgage loans on real estate, net of allowance for losses
of $9,185 in 1998 and $8,435 in 1997 834,253 842,149
Policy loans 61,139 62,207
Short-term investments 63,105 47,507
Other 4,007 3,424
--------------------------------------
Total investments 2,243,560 2,339,111
Cash 9,646 -
Accrued investment income 17,863 18,520
Premium and other receivables 11,852 10,606
Deferred policy acquisition costs 121,145 125,065
Property, equipment and software 16,527 16,753
Reinsurance recoverables:
Paid benefits 8,372 6,588
Benefits and claim reserves ceded 76,798 72,000
Other assets 15,685 16,216
Assets held in separate accounts 206,875 76,964
--------------------------------------
Total assets $2,728,323 $2,681,823
======================================
See accompanying notes to unaudited financial statements.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Balance Sheets
JUNE 30, 1998 DECEMBER 31, 1997
(UNAUDITED)
---------------------------------------
(In Thousands)
LIABILITIES AND STOCKHOLDER'S EQUITY
Future policy benefits:
Life and annuity $1,244,302 $1,259,319
Health 88,909 87,883
Contract account balances 626,768 699,244
Policy and contract claims 62,653 58,381
Unearned revenues 13,311 11,284
Other policyholder funds 15,111 14,286
Outstanding checks in excess of bank balances - 2,669
Current income taxes payable 3,291 2,158
Deferred income taxes 14,539 12,244
Payable to affiliate 505 799
Other liabilities 48,601 72,858
Liabilities related to separate accounts 206,875 76,964
---------------------------------------
Total liabilities 2,324,865 2,298,089
Commitments and contingencies -- -
Stockholder's equity:
Preferred stock of $1 par value; authorized 3,000,000
shares, none issued and outstanding -- -
Common stock of $1 par value; authorized 24,000,000
shares, 12,000,000 shares issued and outstanding 12,000 12,000
Paid-in capital 40,106 40,106
Net unrealized gains on securities 13,237 14,364
Retained earnings 338,115 317,264
---------------------------------------
Total stockholder's equity 403,458 383,734
---------------------------------------
Total liabilities and stockholder's equity $2,728,323 $2,681,823
=======================================
See accompanying notes to unaudited financial statements.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Operations
(Unaudited)
SIX MONTHS ENDED JUNE 30
1998 1997
-----------------------------------
(In Thousands)
Revenues:
Premiums:
Life and annuity $81,754 $75,405
Health 16,207 24,935
Other insurance considerations 19,525 19,064
Net investment income 89,960 82,754
Realized gains, net 9,233 3,661
Other income 22,370 16,669
-----------------------------------
Total revenues 239,049 222,488
Benefits and expenses:
Life and annuity benefits 76,081 62,277
Health benefits 8,572 17,071
Increase in policy liabilities including
interest credited to account balances 46,780 49,828
Real estate expense, net - 819
Commissions 26,807 26,674
(Increase) decrease in deferred policy acquisition costs 3,457 (1,814)
Taxes, licenses and fees 2,061 2,593
Other operating costs and expenses 44,500 41,949
-----------------------------------
Total benefits and expenses 208,258 199,397
-----------------------------------
Earnings before taxes on income 30,791 23,091
Income tax expense 9,940 8,303
-----------------------------------
Net earnings $ 20,851 $ 14,788
===================================
See accompanying notes to unaudited financial statements.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Stockholder's Equity
(Unaudited)
SIX MONTHS ENDED JUNE 30
1998 1997
-----------------------------------
(In Thousands)
Common stock:
Balance at beginning and end of year $ 12,000 $ 12,000
Paid-in capital:
Balance at beginning of year 40,106 40,106
Net unrealized gains on securities:
Balance at beginning of year: 14,364 3,686
Change in net unrealized gains (1,127) (1,522)
-----------------------------------
Balance at end of period 13,237 2,164
Retained earnings:
Balance at beginning of year: 317,264 281,075
Net earnings 20,851 14,788
Dividends declared - -
-----------------------------------
Balance at end of period 338,115 295,863
-----------------------------------
Total stockholder's equity $ 403,458 $ 350,133
===================================
See accompanying notes to unaudited financial statements.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Cash Flows
(Unaudited)
SIX MONTHS ENDED JUNE 30
1998 1997
----------------------------------
(In Thousands)
OPERATING ACTIVITIES
Net earnings $ 20,851 $ 14,788
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Deferred income tax 2,870 4,301
Realized gains, net (9,233) (3,661)
Premium amortization (discount accretion), net (560) (514)
Policy loans lapsed in lieu of surrender benefits 1,826 2,352
Depreciation 1,404 1,850
Amortization 391 391
Changes in assets and liabilities:
(Increase) decrease in accrued investment income 657 (818)
Increase in receivables and reinsurance recoverables (8,122) (5,912)
Policy acquisition costs deferred (11,508) (14,625)
Deferred policy acquisition costs amortized 14,964 12,811
(Increase) decrease in income taxes recoverable 1,110 (2,510)
Increase in accrued policy benefits, claim reserves,
unearned revenues and policyholder funds 20,870 13,808
Interest credited to policyholder accounts 38,494 38,338
Increase in outstanding checks in excess of bank balances (2,669) (2,922)
(Increase) decrease in other assets and other (3,532) 634
liabilities, net
Other, net (1,679) (806)
----------------------------------
Net cash provided by operating activities 66,134 57,505
INVESTING ACTIVITIES Purchases of investments:
Securities available-for-sale
Fixed Maturities (257,275) (259,428)
Equity (20,416) (11,332)
Mortgage and policy loans (129,592) (127,648)
Sales, calls or maturities of investments:
Maturities and calls of securities
available-for-sale:
Fixed Maturities 143,873 88,020
Sales of securities available-for-sale:
Fixed Maturities 227,053 108,208
Equity 16,967 7,514
Mortgage and policy loans 137,924 49,999
Real estate - 1,544
Purchase of property, equipment and software (560) (858)
Net (increase) decrease in short-term investments (15,598) 7,348
Distributions from unconsolidated related parties 653 983
----------------------------------
Net cash provided (used) in investing activities 103,029 (135,650)
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Cash Flows (continued)
(Unaudited)
SIX MONTHS ENDED JUNE 30
1998 1997
-------------------------------
(In Thousands)
FINANCING ACTIVITIES
Net proceeds (disbursements) of interest sensitive and
investment type contracts $ (138,654) $ 78,145
Net proceeds from reverse repurchase borrowing 20,031
Retirement of reverse repurchase borrowing (20,863) (20,031)
-------------------------------
Net cash provided (used) by financing activities (159,517) 78,145
-------------------------------
Net increase in cash 9,646 -
Cash at beginning of year - -
-------------------------------
Cash at end of period $ 9,646 $ -
===============================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
For purposes of the statements of cash flows, Business Men's
Assurance Company of America considers only cash on hand
and demand deposits to be cash.
Cash paid (received) during the year for:
Income taxes $ 4,352 $ 5,579
Interest paid on reverse repurchase borrowing 299 370
-------------------------------
$ 4,651 $ 5,949
===============================
See accompanying notes to unaudited financial statements.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Unaudited Consolidated Financial Statements
June 30, 1998
1. These Financial Statements are unaudited but, in management's opinion,
include all adjustments necessary for a fair presentation of the results.
2. These interim financial statements should be read in conjunction with the
Company's financial statements for the year ended December 31, 1997. The
results of operations for any interim period are not necessarily
indicative of the Company's operating results for a full year.
3. Certain amounts from the prior period's financial statements have been
reclassified to conform with the current period's presentation.
4. In 1998, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes
standards for the reporting and display of comprehensive income and its
components. Comprehensive income includes all changes in equity during a
period except those due to owner investments and distributions. It includes
unrealized gains and losses on available-for-sale securities. This standard
does not change the display or components of net income; rather,
comprehensive income is displayed as a separate statement in the
Consolidated Statement of Comprehensive Income and as a component in the
Consolidated Balance Sheet, and the Consolidated Statement of Stockholders'
Equity.
Total comprehensive income amounted to $19,724,000 during the first six
months of 1998 and $13,266,000 during the first six months of 1997.
CONSOLIDATED FINANCIAL STATEMENTS
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A MEMBER OF THE GENERALI GROUP OF COMPANIES)
YEARS ENDED DECEMBER 31, 1997 AND 1996
WITH REPORT OF INDEPENDENT AUDITORS
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Financial Statements
Years ended December 31, 1997 and 1996
CONTENTS
Report of Independent Auditors................................................1
Audited Consolidated Financial Statements
Consolidated Balance Sheets...................................................2
Consolidated Statements of Operations.........................................4
Consolidated Statements of Stockholder's Equity...............................5
Consolidated Statements of Cash Flows.........................................6
Notes to Consolidated Financial Statements....................................8
Report of Independent Auditors
The Board of Directors
Business Men's Assurance Company of America
We have audited the accompanying consolidated balance sheets of Business Men's
Assurance Company of America (an ultimate subsidiary of Assicurazioni Generali,
S.p.A.) (the Company) as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholder's equity and cash flows for
each of the three years in the period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Business Men's Assurance Company of America at December 31, 1997 and 1996, and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ERNST & YOUNG LLP
[GRAPHIC OMITTED]
Kansas City, Missouri
February 6, 1998
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Balance Sheets
DECEMBER 31
1997 1996
------------------------------------
(In Thousands)
ASSETS
Investments (Notes 1 and 3): Securities available-for-sale, at fair value:
Fixed maturities (amortized cost - $1,308,458 in 1997
and $1,286,888 in 1996) $1,326,018 $1,288,934
Equity securities (cost - $46,807 in 1997 and $28,644 in
1996) 57,806 32,350
Mortgage loans on real estate, net of allowance for losses
of $8,435 in 1997 and $6,879 in 1996 842,149 704,356
Real estate (Note 1) - 5,498
Policy loans 62,207 65,225
Short-term investments 47,507 39,991
Other 3,424 3,830
------------------------------------
Total investments 2,339,111 2,140,184
Accrued investment income 18,520 18,539
Premium and other receivables 10,606 11,817
Deferred policy acquisition costs 125,065 131,025
Property, equipment and software (Note 6) 16,753 18,890
Reinsurance recoverables:
Paid benefits 6,588 3,948
Benefits and claim reserves ceded 72,000 58,177
Other assets (Note 1) 16,216 16,923
Assets held in separate accounts (Note 1) 76,964 -
------------------------------------
Total assets $2,681,823 $2,399,503
====================================
DECEMBER 31
1997 1996
------------------------------------
(In Thousands)
LIABILITIES AND STOCKHOLDER'S EQUITY
Future policy benefits:
Life and annuity (Note 10) $1,259,319 $1,192,497
Health 87,883 75,914
Contract account balances 699,244 636,656
Policy and contract claims 58,381 58,617
Unearned revenues 11,284 13,813
Other policyholder funds 14,286 15,429
Outstanding checks in excess of bank balances 2,669 4,673
Current income taxes payable (Note 7) 2,158 4,345
Deferred income taxes (Note 7) 12,244 14,912
Payable to affiliate (Note 10) 799 972
Other liabilities 72,858 44,808
Liabilities related to separate accounts (Note 1) 76,964 -
------------------------------------
Total liabilities 2,298,089 2,062,636
Commitments and contingencies (Note 5)
Stockholder's equity (Notes 2 and 11):
Preferred stock of $1 par value; authorized 3,000,000
shares, none issued and outstanding - -
Common stock of $1 par value; authorized 24,000,000
shares, 12,000,000 shares issued and outstanding
12,000 12,000
Paid-in capital 40,106 40,106
Net unrealized gains (losses) on securities 14,364 3,686
Retained earnings 317,264 281,075
------------------------------------
Total stockholder's equity 383,734 336,867
------------------------------------
Total liabilities and stockholder's equity $2,681,823 $2,399,503
====================================
See accompanying notes.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Operations
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------------------
(In Thousands)
Revenues:
Premiums:
Life and annuity $154,602 $142,461 $130,360
Health 43,518 60,491 47,294
Other insurance considerations 37,928 38,780 37,183
Net investment income (Note 3) 167,346 145,629 124,605
Realized gains, net (Note 3) 5,121 5,906 4,290
Other income 35,941 26,802 23,394
---------------------------------------------------
Total revenues 444,456 420,069 367,126
Benefits and expenses:
Life and annuity benefits 126,345 122,915 111,734
Health benefits 27,812 42,224 40,132
Increase in policy liabilities including
interest credited to account balances 104,581 94,530 65,017
Real estate expense, net 932 551 649
Commissions 53,622 55,180 54,176
Increase in deferred policy acquisition costs (1,229) (5,459) (16,366)
Taxes, licenses and fees 4,654 5,229 5,251
Other operating costs and expenses 89,018 76,647 82,604
---------------------------------------------------
Total benefits and expenses 405,735 391,817 343,197
---------------------------------------------------
Earnings from continuing operations before income
tax expense 38,721 28,252 23,929
Income tax expense (Note 7) 2,532 10,168 8,503
---------------------------------------------------
Earnings from continuing operations 36,189 18,084 15,426
Discontinued operations (Note 12):
Gain on sale of discontinued operations, net of
income tax expense of $735 in 1996 and $3,352
in 1995 - 1,416 6,355
---------------------------------------------------
Earnings from discontinued operations - 1,416 6,355
---------------------------------------------------
Net earnings $ 36,189 $ 19,500 $ 21,781
===================================================
See accompanying notes.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Stockholder's Equity
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------------------
(In Thousands)
Common stock:
Balance at beginning and end of year $ 12,000 $ 12,000 $ 12,000
Paid-in capital:
Balance at beginning of year 40,106 25,106 25,106
Additional paid-in capital - 15,000 -
----------------------------------------------------
Balance at end of year 40,106 40,106 25,106
Net unrealized gains (losses) on securities:
Balance at beginning of year 3,686 15,297 (28,865)
Change in net unrealized gains (losses) 10,678 (11,611) 44,162
----------------------------------------------------
Balance at end of year 14,364 3,686 15,297
Retained earnings:
Balance at beginning of year 281,075 266,575 252,794
Net earnings 36,189 19,500 21,781
Dividends declared (Note 2) - (5,000) (8,000)
----------------------------------------------------
Balance at end of year 317,264 281,075 266,575
----------------------------------------------------
Total stockholder's equity $383,734 $336,867 $318,978
====================================================
See accompanying notes.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------
(In Thousands)
OPERATING ACTIVITIES
Net earnings $ 36,189 $ 19,500 $ 21,781
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Deferred income tax (benefit) (8,416) 4,146 7,025
Realized gains, net (5,121) (5,906) (4,290)
Gain on disposal of discontinued segment - (2,151) (7,417)
Discount accretion, net (975) (1,246) (1,090)
Policy loans lapsed in lieu of surrender benefits 1,021 2,996 3,201
Depreciation 3,778 4,153 4,817
Amortization 782 782 782
Changes in assets and liabilities:
(Increase) decrease in accrued investment income 19 (1,392) (1,719)
(Increase) decrease in receivables and reinsurance
recoverables (15,425) 2,761 (19,425)
Policy acquisition costs deferred (28,449) (31,745) (40,510)
Policy acquisition costs amortized 27,220 26,286 24,144
(Increase) decrease in income taxes recoverable (2,187) 5,518 (4,546)
Increase in accrued policy benefits, claim
reserves, unearned revenues and policyholder funds 30,777 32,331 4,574
Interest credited to policyholder accounts 79,312 69,494 56,358
Increase (decrease) in outstanding checks in excess of
bank balances (2,004) 805 3,868
Decrease in other assets and other liabilities, net 7,269 412 1,133
Decrease in net asset of discontinued operations - - 1,335
Other, net (433) (1,208) (179)
-----------------------------------------
Net cash provided by operating activities 123,357 125,536 49,842
INVESTING ACTIVITIES
Purchases of investments:
Securities available-for-sale:
Fixed maturities (464,419) (527,172) (592,373)
Equity securities (31,625) (17,586) (12,537)
Mortgage and policy loans (237,990) (259,438) (159,521)
Other - - (269)
Sales, calls or maturities of investments:
Maturities and calls of securities
available-for-sale:
Fixed maturities 167,000 117,057 108,472
Equity securities - - 2,031
Sales of securities available-for-sale:
Fixed maturities 284,124 238,051 263,650
Equity securities 14,379 12,444 6,223
Mortgage and policy loans 98,554 66,934 41,753
Real estate 5,854 2,194 502
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Statements of Cash Flows (continued)
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------
(In Thousands)
INVESTING ACTIVITIES (CONTINUED)
Purchase of property, equipment and software $ (1,949) $ (290) $ (2,659)
Net (increase) decrease in short-term investments (7,516) 36,272 13,264
Proceeds from sale of discontinued operations - 632 5,426
Distributions from unconsolidated related parties 1,514 718 2
-----------------------------------------
Net cash used in investing activities (172,074) (330,184) (326,036)
FINANCING ACTIVITIES
Dividends paid - (5,000) (8,000)
Additional paid-in capital - 15,000 -
Deposits from interest sensitive and investment type contracts 323,487 381,865 401,681
Withdrawals from interest sensitive and investment type contracts (295,633) (187,217) (120,956)
Net proceeds from reverse repurchase borrowing 40,925 35,173 -
Retirement of reverse repurchase borrowing (20,062) (35,173) -
-----------------------------------------
Net cash provided by financing activities 48,717 204,648 272,725
-----------------------------------------
Net decrease in cash - - (3,469)
Cash at beginning of year - - 3,469
=========================================
Cash at end of year $ - $ -$ -
=========================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
For purposes of the statements
of cash flows, Business Men's
Assurance Company of America considers only cash on hand
and demand deposits to be cash
Cash paid during the year for:
Income taxes $ 13,135 $ 1,239 $ 9,376
=========================================
Interest paid on reverse repurchase borrowing $ 369 $ 620 $ -
=========================================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Real estate acquired through foreclosure $ 1,236 $ 3,033 $ 5,156
=========================================
See accompanying notes.
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Notes to Consolidated Financial Statements
December 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Business Men's Assurance Company of America (the Company) is a
Missouri-domiciled life insurance company licensed to sell insurance products in
49 states and the District of Columbia. The Company offers a diversified
portfolio of individual and group insurance and investment products both
directly, primarily distributed through general agencies, and through
reinsurance assumptions. Assicurazioni Generali S.p.A. (Generali), an Italian
insurer, is the ultimate parent company.
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and all majority-owned subsidiaries. All significant intercompany
transactions have been eliminated in consolidation.
INVESTMENTS
The Company's entire investment portfolio is designated as available-for-sale.
Changes in fair values of available-for-sale securities, after adjustment of
deferred policy acquisition costs (DPAC) and deferred income taxes, are reported
as unrealized gains or losses directly in stockholder's equity and, accordingly,
have no effect on net income. The DPAC offset to the unrealized gains or losses
represents valuation adjustments or reinstatements of DPAC that would have been
required as a charge or credit to operations had such unrealized amounts been
realized.
The amortized cost of fixed maturity investments classified as
available-for-sale is adjusted for amortization of premiums and accretion of
discounts. That amortization or accretion is included in net investment income.
Mortgage loans and mortgage-backed securities are carried at unpaid balances
adjusted for accrual of discount and allowances for other than temporary decline
in value. Policy loans are carried at unpaid balances.
Real estate is stated at the lower of cost or fair value. At December 31, 1997,
no real estate was owned; at December 31, 1996, real estate was carried net of a
valuation allowance of $2,344,000. Profit is recognized on real estate sales
when down payment,
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
continuing investment and transfer of risk criteria have been satisfied.
Property, equipment and software, and the home office building are generally
valued at cost, including development costs, less allowances for depreciation
and other than temporary decline in value.
Property, equipment and software are being depreciated over the estimated useful
lives of the assets, principally on a straight-line basis. Depreciation rates on
these assets are set forth in Note 6.
Realized gains and losses on sales of investments and declines in value
considered to be other than temporary are recognized in net earnings on the
specific identification basis.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
DEFERRED POLICY ACQUISITION COSTS
Certain commissions, expenses of the policy issue and underwriting departments
and other variable expenses have been deferred. For limited payment and other
traditional life insurance policies, these deferred acquisition costs are being
amortized over a period of not more than 25 years in proportion to the ratio of
the expected annual premium revenue to the expected total premium revenue.
Expected premium revenue was estimated with the same assumptions used for
computing liabilities for future policy benefits for these policies.
For universal life-type insurance and investment-type products, the deferred
policy acquisition costs are amortized over a period of not more than 25 years
in relation to the present value of estimated gross profits arising from
estimates of mortality, interest, expense and surrender experience. The
estimates of expected gross profits are evaluated regularly and are revised if
actual experience or other evidence indicates that revision is appropriate. Upon
revision, total amortization recorded to date is adjusted by a charge or credit
to current earnings.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Deferred policy acquisition costs are evaluated to determine that the
unamortized portion of such costs does not exceed recoverable amounts after
considering anticipated investment income.
RECOGNITION OF INSURANCE REVENUE AND RELATED EXPENSES
For limited payment and other traditional life insurance policies, premium
income is reported as earned when due with past-due premiums being reserved.
Profits are recognized over the life of these contracts by associating benefits
and expenses with insurance in force for limited payment policies and with
earned premiums for other traditional life policies. This association is
accomplished by a provision for liability for future policy benefits and the
amortization of policy acquisition costs. Accident and health premium revenue is
recognized on a pro rata basis over the terms of the policies.
For universal life and investment-type policies, contract charges for mortality,
surrender and expense, other than front-end expense charges, are reported as
other insurance considerations revenue when charged to policyholders' accounts.
Expenses consist primarily of benefit payments in excess of policyholder account
values and interest credited to policyholder accounts. Profits are recognized
over the life of universal life-type contracts through the amortization of
policy acquisition costs and deferred front-end expense charges with estimated
gross profits from mortality, interest, surrender and expense.
POLICY LIABILITIES AND CONTRACT VALUES
The liability for future policy benefits for limited payment and other
traditional life insurance contracts has been computed primarily by a net level
premium reserve method based on estimates of future investment yield, mortality
and withdrawals made at the time gross premiums were calculated. Assumptions
used in computing future policy benefits are as follows: interest rates range
from 3.25% to 8.50%, depending on the year of issue; withdrawal rates for
individual life policies issued in 1966 and after are based on Company
experience, and policies issued prior to 1966 are based on industry tables; and
mortality rates are based on mortality tables that consider Company experience.
The liability for future policy benefits is graded to reserves stipulated by the
policy over a period of 20 to 25 years or the end of the premium paying period,
if less.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
For universal life and investment-type contracts, the account value before
deduction of any surrender charges is held as the policy liability. An
additional liability is established for deferred front-end expense charges on
universal life-type policies. These expense charges are recognized in income as
insurance considerations using the same assumptions as are used to amortize
deferred policy acquisition costs.
Claims and benefits payable for reported disability income claims have been
computed as the present value of expected future benefit payments based on
estimates of future investment yields and claim termination rates. The amount of
benefits payable included in the future policy benefit reserves and policy and
contract claims for December 31, 1997 and 1996 was $47,211,000 and $38,694,000,
respectively. Interest rates used in the calculation of future investment yields
vary based on the year the claim was incurred and range from 3% to 8.75%. Claim
termination rates are based on industry tables.
Other accident and health claims and benefits payable for reported claims and
incurred but not reported claims are estimated using prior experience. The
methods of calculating such estimates and establishing the related liabilities
are periodically reviewed and updated. Any adjustments needed as a result of
periodic reviews are reflected in current operations.
FEDERAL INCOME TAXES
Deferred federal income taxes have been provided in the consolidated financial
statements to recognize temporary differences between the financial reporting
and tax bases of assets and liabilities measured using enacted tax rates and
laws (Note 7). Temporary differences are principally related to deferred policy
acquisition costs, the provision for future policy benefits, accrual of
discounts on investments, accelerated depreciation and unrealized investment
gains and losses.
SEPARATE ACCOUNTS
These accounts arise from two lines of business, variable annuities and MBIA
insured guaranteed investment contracts (GIC). The separate account assets are
legally segregated and are not subject to the claims which may arise from any
other business of the Company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The assets and liabilities of the variable line of business are reported at fair
value since the underlying investment risks are assumed by the policyowners.
Investment income and gains or losses arising from the variable line of business
accrue directly to the policy owners and are, therefore, not included in
investment earnings in the accompanying consolidated statement of operations.
Revenues to the Company from variable products consist primarily of contract
maintenance charges and administration fees. Separate account assets and
liabilities for the variable line of business totaled $30,000 on December 31,
1997.
The assets of the MBIA GIC line of business are maintained at an amount equal to
the related liabilities. These assets related to the MBIA GIC line of business
include securities available-for-sale reported at fair value and mortgage loans
carried at unpaid balances. Changes in fair values of available-for-sale
securities, net of deferred income taxes, are reported as unrealized gains or
losses directly in stockholders equity.
The liabilities are reported at the original deposit amount plus accrued
interest guaranteed to the contractholders. Investment income and gains or
losses arising from MBIA GIC investments are included in investment earnings in
the accompanying consolidated statement of operations. The guaranteed interest
payable is included in the increase in policy liabilities in the accompanying
consolidated statement of operations. Separate account assets and liabilities
for the MBIA GIC line of business totaled $76,934,000 on December 31, 1997.
INTANGIBLE ASSETS
Goodwill of $12,323,000, net of accumulated amortization of $3,325,000 resulting
from the acquisition of a subsidiary, is included in other assets. Goodwill is
being amortized over a period of 20 years on a straight-line basis, and
amortization amounted to $782,000 for each of the years ended December 31, 1997,
1996 and 1995.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board (FASB) Statement of Financial Accounting
Standards (SFAS) No. 107, "Disclosures about Fair Value of Financial
Instruments," requires disclosure of fair value information about financial
instruments, whether or not
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
recognized in the balance sheet, for which it is practicable to estimate that
value. In cases where quoted market prices are not available, fair values are
based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard, the derived
fair value estimates cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in immediate settlement of the
instruments. SFAS No. 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value of
the Company:
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------------- ---------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------------------------------- ---------------------------------
(In Thousands)
Fixed maturities (Note 3) $1,326,018 $1,326,018 $1,288,934 $1,288,934
Equity securities (Note 3) 57,806 57,806 32,350 32,350
Mortgage loans 842,149 867,552 704,356 707,915
Policy loans 62,207 57,491 65,225 60,735
Short-term investments 47,507 47,507 39,991 39,991
Reinsurance recoverables:
Paid benefits 6,588 6,588 3,948 3,948
Benefits and claim reserves 72,000 72,000 58,177 58,177
Assets held in separate accounts 76,964 77,061 - -
Mortgage loan commitments (Note 5) - 74,469 - 46,735
Investment-type insurance
contracts (Note 4) 1,277,362 1,256,129 1,097,821 1,078,326
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts reported in the
balance sheet for these instruments approximate their fair values.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investment securities: Fair values for fixed maturity securities are based
on quoted market prices, where available. For fixed maturity securities not
actively traded, fair values are estimated using values obtained from
independent pricing services or, in the case of private placements, by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the investments.
The fair value for equity securities is based on quoted market prices.
Off-balance-sheet instruments: The fair value for outstanding loan
commitments approximates the amount committed, as all loan commitments were
made within the last 60 days of the year.
Mortgage loans and policy loans: The fair value for mortgage loans and
policy loans is estimated using discounted cash flow analyses, using
interest rates currently being offered for loans with similar terms to
borrowers of similar credit quality. Loans with similar characteristics are
aggregated for purposes of the calculations. The carrying amount of accrued
interest approximates its fair value.
Flexible and single premium deferred annuities: The cash surrender value of
flexible and single premium deferred annuities approximates their fair
value.
Guaranteed investment contracts: The fair value for the Company's
liabilities under guaranteed investment contracts is estimated using
discounted cash flow analyses, using interest rates currently being offered
for similar contracts with maturities consistent with those remaining for
the contracts being valued.
Supplemental contracts without life contingencies: The carrying amounts of
supplemental contracts without life contingencies approximate their fair
values.
Reinsurance recoverables: The carrying values of reinsurance recoverables
approximate their fair values.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business, the Company becomes a party to various
financial transactions to reduce its exposure to fluctuations in interest rates.
In 1997, the Company entered into interest rate swap contracts for the purpose
of converting the variable interest
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
rate characteristics of certain investments to fixed rates to match those of the
related insurance liabilities (guaranteed investment contracts) that the
investments are supporting. The net interest effect of such swap transactions is
reported as an adjustment of interest income as incurred. The notional amount of
these contracts were $25,000,000 at December 31, 1997.
POSTRETIREMENT BENEFITS
The projected future cost of providing postretirement benefits, such as health
care and life insurance, is recognized as an expense as employees render
service. See Note 8 for further disclosures with respect to postretirement
benefits other than pensions.
IMPAIRMENT OF LOANS
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," and SFAS No.
118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures," require that an impaired mortgage loan's fair value be measured
based on the present value of future cash flows discounted at the loan's
effective interest rate, at the loan's observable market price or at the fair
value of the collateral if the loan is collateral dependent. If the fair value
of a mortgage loan is less than the recorded investment in the loan, the
difference is recorded as an allowance for mortgage loan losses. The change in
the allowance for mortgage loan losses is reported with realized gains or losses
on investments. Interest income on impaired loans is recognized on a cash basis.
PENDING ACCOUNTING STANDARD
SFAS No. 130, "Reporting Comprehensive Income," will be adopted in 1998 and will
require disclosure of comprehensive income which includes the change in
unrealized investment gains and losses. The comprehensive income amount is
expected to be more volatile than net income.
RECLASSIFICATION
Certain amounts for 1996 and 1995 have been reclassified to conform to the
current year presentation.
2. DIVIDEND LIMITATIONS
Missouri has legislation that requires prior reporting of all dividends to the
Director of Insurance. The Company, as a regulated life insurance company, may
pay a dividend from unassigned surplus without the approval of the Missouri
Department of Insurance if the aggregate of all dividends paid during the
preceding 12-month period does not exceed the greater of 10% of statutory
stockholder's equity at the end of the preceding calendar year or the statutory
net gain from operations for the preceding calendar year. A portion of the
statutory equity of the Company that is available for dividends would be subject
to additional federal income taxes should distribution be made from
"policyholders' surplus" (see Note 7).
As of December 31, 1997 and 1996, the Company's statutory stockholder's equity
was $188,193,000 and $171,240,000, respectively. Statutory net gain from
operations and net income for each of the three years in the period ended
December 31, 1997 were as follows:
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------------------
(In Thousands)
Net gain from operations $18,545 $10,898 $8,309
Net income 14,540 10,381 9,418
3. INVESTMENT OPERATIONS
The Company's investments in securities are summarized as follows:
DECEMBER 31, 1997
---------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------------------------------------------------------------
(In Thousands)
Fixed maturities:
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies $ 67,406 $ 1,233 $ (46) $ 68,593
Obligations of states and political
subdivisions 36,053 1,472 (9) 37,516
Debt securities issued by foreign
governments 3,975 121 (126) 3,970
Corporate securities 427,242 8,955 (2,004) 434,193
Mortgage-backed securities 755,467 10,153 (2,330) 763,290
Redeemable preferred stocks 18,315 206 (65) 18,456
---------------------------------------------------------------
Total 1,308,458 22,140 (4,580) 1,326,018
Equity securities 46,807 12,419 (1,420) 57,806
---------------------------------------------------------------
$1,355,265 $34,559 $(6,000) $1,383,824
===============================================================
3. INVESTMENT OPERATIONS (CONTINUED)
DECEMBER 31, 1996
---------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------------------------------------------------------------
(In Thousands)
Fixed maturities:
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies $ 119,125 $ 1,571 $ (802) $ 119,894
Obligations of states and political
subdivisions 40,052 773 (93) 40,732
Debt securities issued by foreign
governments 4,471 166 (267) 4,370
Corporate securities 426,286 6,472 (3,786) 428,972
Mortgage-backed securities 687,455 6,031 (8,147) 685,339
Redeemable preferred stocks 9,499 157 (29) 9,627
---------------------------------------------------------------
Total 1,286,888 15,170 (13,124) 1,288,934
Equity securities 28,644 4,875 (1,169) 32,350
---------------------------------------------------------------
$1,315,532 $20,045 $(14,293) $1,321,284
===============================================================
The amortized cost and estimated fair value of fixed maturity securities at
December 31, 1997, by contractual maturity, are as follows. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Maturities of mortgage-backed securities have not been set forth in the
following table, as such securities are not due at a single maturity date:
AMORTIZED COST FAIR VALUE
------------------------------------
(In Thousands)
Due in one year or less $ 59,899 $ 59,517
Due after one year through five years 140,594 142,573
Due after five years through 10 years 266,145 271,715
Due after 10 years 86,353 88,923
------------------------------------
552,991 562,728
Mortgage-backed securities 755,467 763,290
------------------------------------
Total fixed maturity securities $1,308,458 $1,326,018
====================================
3. INVESTMENT OPERATIONS (CONTINUED)
The majority of the Company's mortgage loan portfolio is secured by real estate.
The following table presents information about the location of the real estate
that secures mortgage loans in the Company's portfolio:
CARRYING AMOUNT AS OF DECEMBER 31,
1997 1996
------------------------------------
(In Thousands)
State:
California $ 71,675 $ 68,399
Arizona 65,030 51,515
Texas 60,821 59,404
Missouri 51,839 34,400
Oklahoma 47,569 32,809
Florida 42,549 30,790
Washington 39,824 34,614
Utah 37,821 25,383
Kansas 34,267 34,069
Other 390,754 332,973
------------------------------------
$842,149 $704,356
====================================
The following table lists the Company's investment in impaired mortgage loans
and related allowance for credit losses at December 31. The table also includes
the average recorded investment in impaired loans and interest income on
impaired loans:
1997 1996 1995
------------------------------------------
(In Thousands)
Impaired mortgage loans $1,069 $2,516 $5,160
Allowance for credit losses 244 691 1,651
-------------------------------------------
Net recorded investment in impaired loans $ 825 $1,825 $3,509
===========================================
Average recorded investment in impaired loans $1,325 $2,667 $2,902
===========================================
Interest income on impaired loans $ 57 $ 115 $ 403
===========================================
3. INVESTMENT OPERATIONS (CONTINUED)
Bonds, mortgage loans, preferred stocks and common stocks approximating
$4,600,000 and $4,200,000 were on deposit with regulatory authorities at
December 31, 1997 and 1996, respectively.
Set forth below is a summary of consolidated net investment income for the years
ended December 31:
1997 1996 1995
-------------------------------------------------
(In Thousands)
Fixed maturities:
Bonds $ 92,741 $ 86,066 $ 73,930
Redeemable preferred stocks 1,309 814 1,176
Equity securities:
Common stocks 793 579 521
Nonredeemable preferred stocks 541 438 330
Mortgage loans on real estate 66,053 52,973 41,770
Policy loans 3,906 3,953 3,952
Short-term investments 2,955 3,016 4,779
Other 1,223 269 340
-------------------------------------------------
169,521 148,108 126,798
Less:
Investment income from discontinued operations - - 211
Investment expenses 2,175 2,479 1,982
=================================================
Net investment income from continuing operations $167,346 $145,629 $124,605
=================================================
3. INVESTMENT OPERATIONS (CONTINUED)
Realized gains (losses) on securities disposed of during 1997, 1996 and 1995
consisted of the following:
1997 1996 1995
--------------------------------------------------------
(In Thousands)
Fixed maturity securities:
Gross realized gains $10,499 $7,953 $10,246
Gross realized losses (4,690) (1,622) (4,388)
Equity securities:
Gross realized gains 3,204 2,001 1,789
Gross realized losses (777) - (376)
Other investments (3,115) (2,426) (2,981)
--------------------------------------------------------
Net realized gains $ 5,121 $5,906 $ 4,290
========================================================
Sales of investments in securities in 1997, 1996 and 1995, excluding maturities
and calls, resulted in gross realized gains of $8,362,000, $9,798,800 and
$11,887,000 and gross realized losses of $1,017,000, $1,290,500 and $4,564,000
respectively.
The net carrying value of nonincome-producing investments at December 31, 1996,
which were nonincome producing during the year, consisted of mortgage loans of
$1,293,000 and bonds of $1,200,000. There were no nonincome producing
investments at December 31, 1997.
4. INVESTMENT CONTRACTS
The carrying amounts and fair values of the Company's liabilities for
investment-type insurance contracts (included with future policy benefits and
contract account balances in the balance sheet) at December 31 are as follows:
1997 1996
-------------------------------- --------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------------------------------- --------------------------------
(In Thousands)
Guaranteed investment contracts $ 660,782 $ 662,281 $ 596,499 $ 598,241
Flexible and single premium
deferred annuities 539,616 516,343 501,322 480,085
Separate accounts 76,964 77,505 - -
-----------------------------------------------------------------
Total investment-type insurance
contracts $1,277,362 $1,256,129 $1,097,821 $1,078,326
=================================================================
4. INVESTMENT CONTRACTS (CONTINUED)
Fair values of the Company's insurance contracts other than investment contracts
are not required to be disclosed. However, the fair values of liabilities under
all insurance contracts are taken into consideration in the Company's overall
management of interest rate risk which minimizes exposure to changing interest
rates through the matching of investment maturities with amounts due under
insurance contracts.
5. COMMITMENTS AND CONTINGENCIES
The Company leases equipment and certain office facilities from others under
operating leases through 2003. Certain other equipment and facilities are rented
monthly. Rental expense amounted to $2,137,000, $2,117,000 and $2,742,000 for
the years ended December 31, 1997, 1996 and 1995, respectively. As of December
31, 1997, the minimum future payments under noncancelable operating leases for
each of the next five years and in the aggregate subsequent to 2002 are as
follows:
1998 $1,093,000
1999 945,000
2000 491,000
2001 386,000
2002 168,000
Subsequent to 2002 2,000
===================
Total $3,085,000
===================
Total outstanding commitments to fund mortgage loans were $74,496,000 and
$46,735,000 at December 31, 1997 and 1996, respectively.
The Company and its subsidiaries are parties to certain claims and legal actions
arising during the ordinary course of business. In the opinion of management,
after consulting with legal counsel, these matters will not have a materially
adverse effect on the operations or financial position of the Company.
6. PROPERTY, EQUIPMENT AND SOFTWARE
A summary of property, equipment and software at December 31 and their
respective depreciation rates is as follows:
RATE OF
DEPRECIATION 1997 1996
------------------- ------------------------------------
(In Thousands)
Home office building, including land with
a cost of $425,000 2% $23,158 $23,158
Other real estate not held-for-sale or
rental 4% 973 1,126
Less accumulated depreciation (12,530) (11,963)
------------------------------------
11,601 12,321
Equipment and software 5%-33% 23,937 29,010
Less accumulated depreciation (18,785) (22,441)
------------------------------------
5,152 6,569
------------------------------------
Total property, equipment and software $16,753 $18,890
====================================
7. FEDERAL INCOME TAXES
The components of the provision for income taxes and the temporary differences
generating deferred income taxes for the years ended December 31 are as follows:
1997 1996 1995
-----------------------------------------------
(In Thousands)
Current $10,948 $ 6,757 $ 4,830
Deferred:
Deferred policy acquisition costs 143 1,322 4,139
Future policy benefits 3,783 2,424 4,010
Accrual of discount 197 408 494
Tax on realized gains greater than book 571 (1,076) (1,034)
Recognition of tax effect previously deferred on sale of
affiliate stock in prior period (11,169) - -
Employee benefit plans (2,206) 86 (148)
Other, net 265 982 (436)
-----------------------------------------------
(8,416) 4,146 7,025
-----------------------------------------------
Total 2,532 10,903 11,855
Less taxes from discontinued operations:
Current - (149) 1,539
Deferred - 884 1,813
-----------------------------------------------
- 735 3,352
-----------------------------------------------
Total taxes from continuing operations $ 2,532 $10,168 $ 8,503
===============================================
The Company did not record any valuation allowances against deferred tax assets
at December 31, 1995, 1996 or 1997.
7. FEDERAL INCOME TAXES (CONTINUED)
Total taxes vary from the amounts computed by applying the federal income tax
rate of 35% to earnings from continuing operations for the following reasons:
1997 1996 1995
-----------------------------------------
(In Thousands)
Application of statutory rate to earnings before taxes
on income $13,552 $ 9,888 $8,375
Tax-exempt municipal bond interest and dividends
received deductions (361) (291) (293)
Recognition of tax effect previously deferred on sale of
affiliate stock in a prior period (11,169) - -
Other 510 571 421
-----------------------------------------
$ 2,532 $10,168 $8,503
=========================================
The significant components comprising the Company's deferred tax assets and
liabilities as of December 31, 1997 and 1996 are as follows:
1997 1996
------------------------------------------
Deferred tax liabilities:
Deferred acquisition costs $29,641 $27,426
Tax effect of sale of affiliates stock - 14,169
Unrealized investment gains and losses 7,735 1,987
Other 9,655 5,532
------------------------------------------
Total deferred tax liability 47,031 49,114
Deferred tax assets:
Reserve for future policy benefits 21,411 23,012
Accrued expenses 8,504 6,636
Other 4,872 4,554
------------------------------------------
Total deferred tax assets 34,787 34,202
==========================================
Net deferred tax liability $12,244 $14,912
==========================================
7. FEDERAL INCOME TAXES (CONTINUED)
Certain amounts that were not currently taxed under pre-1984 tax law were
credited to a "policyholders' surplus" account. This account is frozen under the
1984 Tax Act and is taxable only when distributed to stockholders at which time
it is taxed at regular corporate rates. The "policyholders' surplus" of the
Company approximates $87,000,000. The Company has no present plan for
distributing the amount in "policyholders' surplus." Consequently, no provision
has been made in the consolidated financial statements for the taxes thereon.
However, if such taxes were assessed, the amount of taxes payable would be
approximately $30,000,000.
Earnings taxed on a current basis are accumulated in a "shareholder's surplus"
account and can be distributed to the shareholder without tax. The shareholder's
surplus amounted to approximately $247,000,000 at December 31, 1997.
8. BENEFIT PLANS
TRUSTEED EMPLOYEE RETIREMENT PLAN AND JONES & BABSON, INC. PENSION PLAN
The Company has a trusteed employee retirement plan for the benefit of salaried
employees who have reached age 21 and who have completed one year of service.
The plan, which is administered by an Employees' Retirement Committee consisting
of at least three officers appointed by the Board of Directors of the Company,
provides for normal retirement at age 65 or earlier retirement based on minimum
age and service requirements. Retirement may be deferred to age 70. Upon
retirement, the retirees receive monthly benefit payments from the plan's BMA
group pension investment contract. During 1997, approximately $4.3 million of
annual benefits were covered by a group pension investment contract issued by
the Company. Assets of the plan, primarily equities, are held by three trustees
appointed by the Board of Directors.
The Company's subsidiary, Jones & Babson, Inc., had a pension plan covering
substantially all employees. As of January 5, 1995, that plan was merged into
the trusteed plan for BMA salaried employees. The benefits for the Jones &
Babson, Inc. employees in the merged plan were the same as provided in the
previous Jones & Babson, Inc. pension plan. Effective January 1, 1997, the
benefit formula for the Jones & Babson, Inc.
8. BENEFIT PLANS (CONTINUED)
employees was changed to be identical with the benefit formula used for BMA
employees. All benefits accrued prior to January 1, 1997 have been preserved.
Employees of the Company's subsidiary, BMA Financial Services, Inc., became
eligible to participate in the Company's plan effective January 1, 1995.
The following table sets forth the plan's funded status at December 31:
1997 1996
------------------------------
(In Thousands)
Actuarial present value of accumulated benefit obligations:
Vested $ 50,968 $ 45,377
Non-vested 1,397 1,296
------------------------------
Total $ 52,365 $ 46,673
==============================
Projected benefit obligation for service rendered to date $(62,683) $(57,186)
Plan assets at fair value 85,605 79,679
------------------------------
Plan assets in excess of projected benefit obligation 22,922 22,493
Unrecognized net gain from past experience different from that assumed
and effects of changes in assumptions (23,519) (24,732)
Prior service cost not yet recognized in net periodic
pension cost 2,034 2,607
Unrecognized net asset at January 1, 1987 being recognized over
15 years (1,177) (1,471)
Adjustment to recognize minimum liability (50) (57)
------------------------------
Prepaid (accrued) pension cost $ 210 $ (1,160)
==============================
1997 1996 1995
--------------------------------------------
Net pension cost included the following components:
Service cost - benefits earned during the period $ 1,767 $1,797 $ 1,758
Interest cost on projected benefit obligation 4,374 4,195 4,089
Actual return on plan assets (10,316) (9,745) (12,888)
Net amortization and deferral 2,812 3,102 7,019
--------------------------------------------
Net pension benefit $ (1,363) $ (651) $ (22)
============================================
8. BENEFIT PLANS (CONTINUED)
In determining the actuarial present value of the projected benefit obligation,
the weighted-average discount rate utilized was 7.5% for 1997, 8% for 1996 and
7.5% for 1995, and the rate of increase in future compensation levels used was
5% for 1997, 5.5% for 1996 and 5% for 1995. The expected long-term rate of
return on assets was 8% in 1997, 1996 and 1995.
SUPPLEMENTAL RETIREMENT PROGRAMS AND DEFERRED COMPENSATION PLAN
The Company has supplemental retirement programs for senior executive officers
and for group sales managers and group sales persons who are participants in the
trusteed retirement plan. These programs are not qualified under Section 401(a)
of the Internal Revenue Code and are not prefunded. Benefits are paid directly
by the Company as they become due. Benefits are equal to an amount computed on
the same basis as under the trusteed retirement plan (except incentive
compensation is included and limitations under Sections 401 and 415 of the
Internal Revenue Code are not considered) less the actual benefit payable under
the trusteed plan.
The Company also has a deferred compensation plan for the Company's managers
that provides retirement benefits based on renewal premium income at retirement
resulting from the sales unit developed by the manager. This program is not
qualified under Section 401(a) of the Internal Revenue Code and is not
prefunded. As of January 1, 1987, the plan was frozen with respect to new
entrants. Currently, there are two managers who have not retired and will be
entitled to future benefits under the program. The actuarial present value of
benefits shown below includes these active managers, as well as all managers who
have retired and are entitled to benefits under the program.
8. BENEFIT PLANS (CONTINUED)
The following table sets forth the combined supplemental retirement programs'
and deferred compensation plan's funded status at December 31:
1997 1996
-----------------------------
(In Thousands)
Actuarial present value of accumulated benefit obligations:
Vested $ 9,964 $ 8,535
Non-vested 136 234
-----------------------------
Total $ 10,100 $ 8,769
=============================
Projected benefit obligation for service rendered to date $(11,281) $(10,178)
Unrecognized net loss from past experience different from that assumed
and effects of changes in assumptions 2,260 1,319
Prior service cost not yet recognized in net periodic pension
cost 678 856
Unrecognized net obligation at January 1, 1987 being recognized
over 15 years 729 911
Adjustment required to recognize minimum liability (2,486) (1,677)
-----------------------------
Accrued pension liability $(10,100) $ (8,769)
=============================
1997 1996 1995
------------------------------------------
Net pension cost included the following components:
Service cost - benefits earned during the period $ 190 $ 189 $ 197
Interest cost on projected benefit obligation 783 761 651
Net amortization and deferral 469 513 371
------------------------------------------
Net pension cost $1,442 $1,463 $1,219
==========================================
In determining the actuarial present value of the projected benefit obligation,
the weighted-average discount rate utilized was 7.5% for 1997, 8% for 1996 and
7.5% for 1995. The rate of increase in future compensation levels used was 5%
for 1997, 5.5% for 1996 and 5% for 1995.
8. BENEFIT PLANS (CONTINUED)
SAVINGS AND INVESTMENT PLANS
The Company has savings and investment plans qualifying under Section 401(k) of
the Internal Revenue Code. Employees and sales representatives are eligible to
participate after one year of service. Participant contributions are invested by
the trustees for the plans at the direction of the participant in any one or
more of four investment funds. The Company makes matching contributions in
varying amounts. The Company's matching contributions amounted to $1,099,000 in
1997, $1,284,000 in 1996 and $1,336,000 in 1995. Participants are fully vested
in the Company match after five years of service.
The Company has a field force retirement plan for the benefit of agents and
managers. The plan is a defined contribution plan with contributions made
entirely by the Company. Each agent or manager under a standard contract with
one year of service with the Company is eligible to participate. The Company
makes an annual contribution for each participant equal to 3% of eligible
earnings up to the Social Security wage base and 6% of eligible earnings which
are in excess of the Social Security wage base. Each participant is fully vested
in his retirement account after five years of service. Assets of the plan are
deposited in a retirement trust fund and maintained by the plan trustees who are
appointed by the Company. The Company incurred costs related to this plan of
$230,000 in 1997, $225,000 in 1996 and $420,000 in 1995.
DEFINED BENEFIT HEALTH CARE PLAN
In addition to the Company's other benefit plans, the Company sponsors an
unfunded defined benefit health care plan that provides postretirement medical
benefits to full-time employees for whom the sum of the employee's age and years
of service equals or exceeds 75, with a minimum age requirement of 50 and at
least 10 years of service. The plan is contributory, with retiree contributions
adjusted annually, and contains other cost-sharing features such as deductibles
and coinsurance. The accounting for the plan anticipates a future cost-sharing
arrangement with retirees that is consistent with the Company's past practices.
8. BENEFIT PLANS (CONTINUED)
The following table presents the plan's funded status at December 31:
1997 1996
---------------------------------
(In Thousands)
Accumulated postretirement benefit obligation:
Retirees $ 9,636 $10,199
Active plan participants 1,854 2,054
---------------------------------
11,490 12,253
Plan assets at fair value - -
---------------------------------
Accumulated postretirement benefit obligation in excess of plan
assets 11,490 12,253
Unrecognized net loss (268) (125)
Unrecognized transition obligation (4,872) (5,199)
Unrecognized prior service costs (2,808) (4,008)
---------------------------------
Accrued postretirement benefit cost $ 3,542 $ 2,921
=================================
Net periodic postretirement benefit cost includes the following components:
1997 1996 1995
-----------------------------------------
(In Thousands)
Service cost $ 122 $ 118 $ 153
Interest cost 878 867 771
Amortization of transition obligation over 20 years 327 327 511
Amortization of past service costs 407 407 -
-----------------------------------------
Net periodic postretirement benefit cost $1,734 $1,719 $1,435
=========================================
The weighted-average annual assumed rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) varies per year, equal to
the maximum contractual increase of the Company's contribution. Because the
Company's future contributions are contractually limited as discussed above, an
increase in the health care cost trend rate has a minimal impact on expected
benefit payments.
8. BENEFIT PLANS (CONTINUED)
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25%, 7.5% and 7.5% at December 31, 1997,
1996 and 1995 respectively.
During the year ended December 31, 1995, the Company recognized a reduction in
the accumulated postretirement benefit obligation of approximately $3,165,000
from a curtailment of the plan due to the disposal of its medical line of
business. The decrease in the accumulated postretirement benefit obligation has
been directly offset by a reduction of the remaining unrecognized transition
obligation. The Company also adopted certain plan amendments during 1995 that
resulted in an increase to the accumulated postretirement benefit obligation of
approximately $4,415,000 related to prior service rendered by plan participants.
This amount has been deferred and will be amortized over the remaining service
period of active plan participants.
9. REINSURANCE
The Company actively solicits reinsurance from other companies. The Company also
cedes portions of the insurance it writes as described in the next paragraph.
The effect of reinsurance on premiums earned from continuing operations was as
follows:
1997 1996 1995
----------------------------------------------
(In Thousands)
Direct $118,192 $124,912 $153,476
Assumed 134,541 116,154 102,212
Ceded (54,613) (38,114) (77,604)
----------------------------------------------
Total net premium 198,120 202,952 178,084
Less net premium from discontinued operations - - 430
----------------------------------------------
Total net premium from continuing operations $198,120 $202,952 $177,654
==============================================
The Company reinsures with other companies portions of the insurance it writes,
thereby limiting its exposure on larger risks. Normal retentions without
reinsurance are $750,000 on an individual life policy, $750,000 on individual
life insurance assumed and $200,000 on an individual life insured under a single
group life policy. As of December 31, 1997, the Company had ceded to other life
insurance companies individual life insurance in force of approximately $24.1
billion and group life of approximately $654 million.
9. REINSURANCE (CONTINUED)
Benefits and reserves ceded to other insurers amounted to $42,069,000,
$28,132,000 and $53,672,000 during the years ended December 31, 1997, 1996 and
1995, respectively. At December 31, 1997 and 1996, policy reserves ceded to
other insurers were $55,568,000 and $43,573,000, respectively. Claim reserves
ceded amounted to $16,432,000 and $14,604,000 at December 31, 1997 and 1996,
respectively. The Company remains contingently liable on all reinsurance ceded
by it to others. This contingent liability would become an actual liability in
the event an assuming reinsurer should fail to perform its obligations under its
reinsurance agreement with the Company.
10. RELATED-PARTY TRANSACTIONS
The Company reimburses Generali's U.S. branch for certain expenses incurred on
the Company's behalf. These expenses were not material in 1997, 1996 or 1995.
The Company retrocedes a portion of the life insurance it assumes to Generali.
In accordance with this agreement, the Company ceded premiums of $873,000,
$1,035,000 and $1,023,000 during 1997, 1996 and 1995, respectively. The Company
ceded no claims during 1997, 1996 or 1995.
In 1995, the Company entered into a modified coinsurance agreement with Generali
to cede 50% of certain single-premium deferred annuity contracts issued. In
accordance with this agreement, $35 million, $60 million and $137 million in
account balances were ceded to Generali in 1997, 1996 and 1995, respectively,
and Generali loaned such amounts back to the Company. Account balances ceded and
loaned back at December 31, 1997 and 1996 were $213 million and $193 million,
respectively. The recoverable amount from Generali was offset against the loan.
The net expense related to this agreement was $1,895,000, $1,344,000 and
$136,000 for the years ended December 31, 1997, 1996 and 1995, respectively. The
Company held payables to Generali of $799,000 and $972,000 at December 31, 1997
and 1996, respectively.
11. STOCKHOLDER'S EQUITY
The components of the balance sheet caption "net unrealized gain on securities"
in stockholder's equity are summarized as follows:
1997 1996
------------------------------------
(In Thousands)
Net unrealized gains (losses) on securities:
Fixed maturities $17,560 $2,046
Equity securities 10,999 3,706
Securities held in separate account 334 -
------------------------------------
Net unrealized gains (losses) 28,893 5,752
Adjustment to deferred policy acquisition costs (7,224) (35)
Adjustment to unearned revenue reserve 430 (44)
Deferred income taxes (7,735) (1,987)
------------------------------------
Net unrealized gains (losses) $14,364 $3,686
====================================
12. DISCONTINUED OPERATIONS
In June of 1994, the Company adopted a plan to dispose of its medical line of
business. Accordingly, the medical line of business was considered a
discontinued operation for the years ended 1996 and 1995, and the consolidated
financial statements report separately the net assets and operating results of
the discontinued operations.
During 1994, the Company entered into an agreement to dispose of the Company's
Kansas and Missouri group medical business and sell the Company's wholly-owned
HMO, BMA Selectcare. The transaction closed on December 31, 1994. The agreement
provided for the full reinsurance of the Company's Kansas and Missouri group
medical business through the renewal dates of the related group contracts. The
estimated gain on disposal of this business was recorded in 1994. An additional
gain of $661,000, net of tax, was recorded in 1995 reflecting various
adjustments to initial estimates.
The Company also entered into an agreement during 1994 to dispose of the
remainder of its medical line of business effective January 1, 1995. This
transaction closed January 31, 1995 and, accordingly, was reflected in the 1995
financial statements. The agreement provided for the reinsurance of
substantially all of the Company's remaining group and
12. DISCONTINUED OPERATIONS (CONTINUED)
individual medical business through the renewal dates of the related contracts.
Under the agreement, the Company continued to remain primarily liable for
claims, billing and receipts through the next anniversary dates of the policies
reinsured. The estimated gain on disposal of this business of $5,694,000, net of
income taxes, was recorded in 1995. An additional gain of $1,416,000, net of
income taxes, was recorded in 1996 reflecting various adjustments to initial
estimates.
13. IMPACT OF YEAR 2000 (UNAUDITED)
Some of the Company's computer systems were written using two digits rather than
four to define the applicable year. As a result, those computer systems will not
recognize the year 2000 which, if not corrected, could cause disruptions of
operations, including, among other things, an inability to process transactions
or engage in similar normal business activities.
The Company has developed a plan to modify its information technology to be
ready for the year 2000 and has begun converting critical data processing
systems. The Company currently expects the project to be substantially complete
by late 1998 which is prior to any anticipated impact on its operating systems.
Based on this plan, the Company does not believe that the costs to complete such
system modifications or replacements will be material to the Company's financial
statements.
APPENDIX A
ILLUSTRATION OF POLICY VALUES
In order to show You how the Policy works, We created some hypothetical
examples. We chose two males ages 45 and 55 and a female age 50. Our
hypothetical insureds are in good health, do not smoke and qualify for preferred
non-tobacco rates. The initial and Planned Premiums are shown in the upper left
hand corner of each illustration. The Death Proceeds, Accumulation Values and
Cash Surrender Values would be lower if the Primary Insured was in a standard
non-tobacco, tobacco or special Rate Class since the cost of insurance charges
would increase.
There are three illustrations -- all of which are based on the above. We also
assumed that the underlying Investment Option had gross rates of return of 0%,
6%, 12%. This means that the underlying Investment Option would earn these rates
of return before the deduction of the advisory fee and operating expenses. When
these costs are taken into account, the net annual investment return rates (net
of an average of approximately .905% for these charges) are approximately -.91%,
5.09% and 11.09%. (Version A of the illustrations below) When these costs are
taken into account, the net annual investment return rates (net of an average of
approximately .9462% for these charges) are approximately -.95%, 5.05% and
11.05%. (Version B of the illustrations below)
It is important to be aware that this illustration assumes a level rate of
return for all years. If the actual rate of return moves up and down over the
years instead of remaining level, this may make a big difference in the
long-term investment results of Your Policy. In order to properly show You how
the Policy actually works, We calculated values for the Accumulation Value, Cash
Surrender Value and the Death Proceeds. The Death Proceeds are the Death Benefit
minus any outstanding loans and loan interest accrued. We used the charges We
described in the Expenses Section of the Prospectus. These charges are: (1)
Premium Charge; (2) Policy Charge (3) Risk Charge. We also deducted for the cost
of insurance based on both the current charges and the guaranteed charges. The
values also assume that each Investment Option will incur expenses annually
which are assumed to be .905% (Version A below ) and .9462% (Version B below) of
the average net assets of the Investment Option. This is the average in 1997 or
estimated (for new Investment Options) through 1998. The illustration assumes no
loans were taken.
There is also a column labeled "Premiums Accumulated at 5% Interest Per Year."
This shows how the Premium grows if it was invested at 5% per year.
We will furnish You, upon request, a comparable personalized illustration
reflecting the proposed insured's Age, Rate Class, Specified Amount, the Planned
Premiums, and reflecting both the current cost of insurance and the guaranteed
cost of insurance.
- --------------------------------------------------------------------------------------------------
ILLUSTRATIONS - VERSION A
BMA
CLARITY VARIABLE UNIVERSAL LIFE
MALE AGE 45 PREFERRED NON-TOBACCO
Planned Premium: $1,980 ASSUMING GUARANTEED CHARGES
- ------------------------------------------------------- -------------------------------------------------------------------
Premiums Death Proceeds Accumulation Value
End of Accumulated Assuming Hypothetical Gross Assuming Hypothetical Gross
Policy at 5% Annual Investment Return of Annual Investment Return of
Year Interest
Per Year
- -------- ------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-.91% Net) (5.09% Net) (11.09% Net) (-.91% Net) (5.09% Net) (11.09% Net)
- -------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1 2,079 150,000 150,000 150,000 1,054 1,141 1,227
2 4,262 150,000 150,000 150,000 2,234 2,477 2,732
3 6,554 150,000 150,000 150,000 3,355 3,833 4,352
4 8,961 150,000 150,000 150,000 4,417 5,205 6,098
5 11,488 150,000 150,000 150,000 5,415 6,591 7,977
6 14,141 150,000 150,000 150,000 6,348 7,988 10,002
7 16,927 150,000 150,000 150,000 7,208 9,389 12,181
8 19,853 150,000 150,000 150,000 7,986 10,785 14,522
9 22,924 150,000 150,000 150,000 8,675 12,168 17,037
10 26,149 150,000 150,000 150,000 9,265 13,526 19,735
11 29,536 150,000 150,000 150,000 9,818 14,945 22,757
12 33,092 150,000 150,000 150,000 10,256 16,329 26,020
13 36,825 150,000 150,000 150,000 10,573 17,674 29,550
14 40,746 150,000 150,000 150,000 10,759 18,970 33,377
15 44,862 150,000 150,000 150,000 10,799 20,199 37,529
16 49,184 150,000 150,000 150,000 10,677 21,345 42,039
17 53,722 150,000 150,000 150,000 10,373 22,388 46,948
18 58,487 150,000 150,000 150,000 9,862 23,300 52,297
19 63,491 150,000 150,000 150,000 9,110 24,049 58,138
20 68,744 150,000 150,000 150,000 8,084 24,597 64,533
Initial Specified Amount: $150,000
Death Benefit Option: Level
- ----------------------------------------------
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
- ---------------------------------------------
0% Gross 6 % Gross 12% Gross
(-.91% Net) (5.09% Net) (11.09% Net)
- ----------- ------------- -------------
0 0 0
0 2 257
880 1,358 1,877
1,942 2,730 3,623
3,360 4,536 5,922
4,689 6,329 8,343
5,970 8,152 10,944
7,168 9,967 13,705
8,253 11,746 16,616
9,265 13,526 19,735
9,818 14,945 22,757
10,256 16,329 26,020
10,573 17,674 29,550
10,759 18,970 33,377
10,799 20,199 37,529
10,677 21,345 42,039
10,373 22,388 46,948
9,862 23,300 52,297
9,110 24,049 58,138
8,084 24,597 64,533
<FN>
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
</FN>
BMA
CLARITY VARIABLE UNIVERSAL LIFE
MALE AGE 45 PREFERRED NON-TOBACCO
Planned Premium: $1,980 ASSUMING CURRENT CHARGES
- ------------------------------------------------------- -------------------------------------------------------------------
Premiums Death Proceeds Accumulation Value
End of Accumulated Assuming Hypothetical Gross Assuming Hypothetical Gross
Policy at 5% Annual Investment Return of Annual Investment Return of
Year Interest
Per Year
- -------- ------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-.91% Net) (5.09% Net) (11.09% Net) (-.91% Net) (5.09% Net) (11.09% Net)
- -------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1 2,079 150,000 150,000 150,000 1,079 1,166 1,253
2 4,262 150,000 150,000 150,000 2,361 2,611 2,871
3 6,554 150,000 150,000 150,000 3,603 4,098 4,636
4 8,961 150,000 150,000 150,000 4,806 5,632 6,564
5 11,488 150,000 150,000 150,000 5,970 7,213 8,672
6 14,141 150,000 150,000 150,000 7,095 8,844 10,981
7 16,927 150,000 150,000 150,000 8,180 10,525 13,509
8 19,853 150,000 150,000 150,000 9,224 12,258 16,280
9 22,924 150,000 150,000 150,000 10,225 14,042 19,316
10 26,149 150,000 150,000 150,000 11,180 15,877 22,644
11 29,536 150,000 150,000 150,000 12,163 17,863 26,432
12 33,092 150,000 150,000 150,000 13,095 19,911 30,603
13 36,825 150,000 150,000 150,000 13,968 22,015 35,196
14 40,746 150,000 150,000 150,000 14,785 24,183 40,265
15 44,862 150,000 150,000 150,000 15,541 26,414 45,862
16 49,184 150,000 150,000 150,000 16,172 28,650 51,998
17 53,722 150,000 150,000 150,000 16,733 30,947 58,789
18 58,487 150,000 150,000 150,000 17,231 33,316 66,322
19 63,491 150,000 150,000 150,000 17,655 35,752 74,682
20 68,744 150,000 150,000 150,000 18,005 38,261 83,974
Initial Specified Amount: $150,000
Death Benefit Option: Level
- ------------------------------------------------
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-.91% Net) (5.09% Net) (11.09% Net)
- ------------- ------------- -------------
0 0 0
0 136 396
1,128 1,623 2,161
2,331 3,157 4,089
3,915 5,158 6,617
5,436 7,185 9,322
6,943 9,288 12,272
8,407 11,440 15,462
9,804 13,621 18,895
11,180 15,877 22,644
12,163 17,863 26,432
13,095 19,911 30,603
13,968 22,015 35,196
14,785 24,183 40,265
15,541 26,414 45,862
16,172 28,650 51,998
16,733 30,947 58,789
17,231 33,316 66,322
17,655 35,752 74,682
18,005 38,261 83,974
<FN>
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
</FN>
BMA
CLARITY VARIABLE UNIVERSAL LIFE
MALE AGE 55 PREFERRED NON-TOBACCO
Planned Premium: $3,654 ASSUMING GUARANTEED CHARGES
- ------------------------------------------------------- ------------------------------------------------------------------- ------
Premiums Death Proceeds Accumulation Value
End of Accumulated Assuming Hypothetical Gross Assuming Hypothetical Gross
Policy at 5% Annual Investment Return of Annual Investment Return of
Year Interest
Per Year
- -------- ------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-.91% Net) (5.09% Net) (11.09% Net) (-.91% Net) (5.09% Net) (11.09% Net)
- -------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1 3,837 150,000 150,000 150,000 1,956 2,116 2,276
2 7,865 150,000 150,000 150,000 3,956 4,402 4,870
3 12,095 150,000 150,000 150,000 5,815 6,681 7,624
4 16,537 150,000 150,000 150,000 7,529 8,944 10,551
5 21,200 150,000 150,000 150,000 9,084 11,178 13,657
6 26,097 150,000 150,000 150,000 10,468 13,370 16,954
7 31,238 150,000 150,000 150,000 11,667 15,503 20,455
8 36,637 150,000 150,000 150,000 12,660 17,556 24,167
9 42,306 150,000 150,000 150,000 13,420 19,502 28,100
10 48,258 150,000 150,000 150,000 13,921 21,311 32,268
11 54,507 150,000 150,000 150,000 14,253 23,112 36,906
12 61,069 150,000 150,000 150,000 14,279 24,740 41,880
13 67,959 150,000 150,000 150,000 13,967 26,167 47,238
14 75,194 150,000 150,000 150,000 13,287 27,361 53,040
15 82,790 150,000 150,000 150,000 12,194 28,278 59,357
16 90,767 150,000 150,000 150,000 10,622 28,854 66,267
17 99,142 150,000 150,000 150,000 8,397 28,931 73,815
18 107,936 150,000 150,000 150,000 5,574 28,544 82,218
19 117,169 150,000 150,000 150,000 1,923 27,485 91,592
20 126,864 0 150,000 150,000 0 25,593 102,159
Initial Specified Amount: $150,000
Death Benefit Option: Level
- ------------------------------------------------
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-.91% Net) (5.09% Net) (11.09% Net)
- ------------- ------------- -------------
0 0 0
302 748 1,216
2,161 3,027 3,970
3,875 5,290 6,897
6,051 8,145 10,624
8,020 10,922 14,506
9,840 13,676 18,628
11,454 16,350 22,961
12,799 18,881 27,479
13,921 21,311 32,268
14,253 23,112 36,906
14,279 24,740 41,880
13,967 26,167 47,238
13,287 27,361 53,040
12,194 28,278 59,357
10,622 28,854 66,267
8,397 28,931 73,815
5,574 28,544 82,218
1,923 27,485 91,592
0 25,593 102,159
<FN>
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
</FN>
BMA
CLARITY VARIABLE UNIVERSAL LIFE
MALE AGE 55 PREFERRED NON-TOBACCO
Planned Premium: $3,654 ASSUMING CURRENT CHARGES
- ------------------------------------------------------- ------------------------------------------------------------------- ------
Premiums Death Proceeds Accumulation Value
End of Accumulated Assuming Hypothetical Gross Assuming Hypothetical Gross
Policy at 5% Annual Investment Return of Annual Investment Return of
Year Interest
Per Year
- -------- ------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-.91% Net) (5.09% Net) (11.09% Net) (-.91% Net) (5.09% Net) (11.09% Net)
- -------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1 3,837 150,000 150,000 150,000 2,263 2,432 2,602
2 7,865 150,000 150,000 150,000 4,676 5,164 5,674
3 12,095 150,000 150,000 150,000 7,001 7,967 9,015
4 16,537 150,000 150,000 150,000 9,236 10,841 12,654
5 21,200 150,000 150,000 150,000 11,378 13,786 16,619
6 26,097 150,000 150,000 150,000 13,428 16,808 20,949
7 31,238 150,000 150,000 150,000 15,379 19,904 25,681
8 36,637 150,000 150,000 150,000 17,231 23,077 30,861
9 42,306 150,000 150,000 150,000 18,975 26,324 36,535
10 48,258 150,000 150,000 150,000 20,597 29,638 42,754
11 54,507 150,000 150,000 150,000 22,217 33,194 49,828
12 61,069 150,000 150,000 150,000 23,726 36,857 57,662
13 67,959 150,000 150,000 150,000 25,119 40,638 66,358
14 75,194 150,000 150,000 150,000 26,395 44,544 76,035
15 82,790 150,000 150,000 150,000 27,534 48,575 86,821
16 90,767 150,000 150,000 150,000 28,228 52,486 98,728
17 99,142 150,000 150,000 150,000 28,727 56,499 112,089
18 107,936 150,000 150,000 150,000 29,063 60,662 127,150
19 117,169 150,000 150,000 157,117 29,221 64,986 144,144
20 126,864 150,000 150,000 174,444 29,163 69,470 163,031
Initial Specified Amount: $150,000
Death Benefit Option: Level
- ------------------------------------------------
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-.91% Net) (5.09% Net) (11.09% Net)
- ------------- ------------- -------------
0 0 0
1,022 1,510 2,020
3,347 4,313 5,361
5,582 7,187 9,000
8,345 10,753 13,586
10,980 14,360 18,501
13,552 18,077 23,854
16,025 21,871 29,655
18,354 25,703 35,914
20,597 29,638 42,754
22,217 33,194 49,828
23,726 36,857 57,662
25,119 40,638 66,358
26,395 44,544 76,035
27,534 48,575 86,821
28,228 52,486 98,728
28,727 56,499 112,089
29,063 60,662 127,150
29,221 64,986 144,144
29,163 69,470 163,031
<FN>
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
</FN>
BMA
CLARITY VARIABLE UNIVERSAL LIFE
FEMALE AGE 50 PREFERRED NON-TOBACCO
Planned Premium: $2,232 ASSUMING GUARANTEED CHARGES
- ------------------------------------------------------- ------------------------------------------------------------------- ------
Premiums Death Proceeds Accumulation Value
End of Accumulated Assuming Hypothetical Gross Assuming Hypothetical Gross
Policy at 5% Annual Investment Return of Annual Investment Return of
Year Interest
Per Year
- -------- ------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-.91% Net) (5.09% Net) (11.09% Net) (-.91% Net) (5.09% Net) (11.09% Net)
- -------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1 2,344 150,000 150,000 150,000 1,161 1,257 1,354
2 4,804 150,000 150,000 150,000 2,441 2,712 2,995
3 7,388 150,000 150,000 150,000 3,651 4,183 4,758
4 10,101 150,000 150,000 150,000 4,793 5,663 6,648
5 12,950 150,000 150,000 150,000 5,859 7,153 8,679
6 15,941 150,000 150,000 150,000 6,849 8,650 10,864
7 19,082 150,000 150,000 150,000 7,764 10,155 13,220
8 22,379 150,000 150,000 150,000 8,604 11,668 15,769
9 25,842 150,000 150,000 150,000 9,375 13,196 18,536
10 29,478 150,000 150,000 150,000 10,072 14,735 21,544
11 33,295 150,000 150,000 150,000 10,767 16,380 24,952
12 37,303 150,000 150,000 150,000 11,368 18,028 28,670
13 41,512 150,000 150,000 150,000 11,854 19,659 32,719
14 45,931 150,000 150,000 150,000 12,198 21,246 37,119
15 50,572 150,000 150,000 150,000 12,373 22,766 41,899
16 55,444 150,000 150,000 150,000 12,367 24,204 47,106
17 60,559 150,000 150,000 150,000 12,165 25,546 52,795
18 65,931 150,000 150,000 150,000 11,763 26,789 59,041
19 71,571 150,000 150,000 150,000 11,158 27,927 65,933
20 77,493 150,000 150,000 150,000 10,333 28,944 73,564
Initial Specified Amount: $150,000
Death Benefit Option: Level
- ------------------------------------------------
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-.91% Net) (5.09% Net) (11.09% Net)
- ------------- ------------- -------------
0 0 0
0 201 484
1,143 1,672 2,247
2,282 3,152 4,137
3,766 5,069 6,596
5,166 6,967 9,181
6,508 8,899 11,965
7,776 10,840 14,941
8,947 12,768 18,108
10,072 14,735 21,544
10,767 16,380 24,952
11,368 18,028 28,670
11,854 19,659 32,719
12,198 21,246 37,119
12,373 22,766 41,899
12,367 24,204 47,106
12,165 25,546 52,795
11,763 26,789 59,041
11,158 27,927 65,933
10,333 28,944 73,564
<FN>
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
</FN>
BMA
CLARITY VARIABLE UNIVERSAL LIFE
FEMALE AGE 50 PREFERRED NON-TOBACCO
Planned Premium: $2,232 ASSUMING CURRENT CHARGES
------------------------------------------------------- ------------------------------------------------------------------- ------
Premiums Death Proceeds Accumulation Value
End of Accumulated Assuming Hypothetical Gross Assuming Hypothetical Gross
Policy at 5% Annual Investment Return of Annual Investment Return of
Year Interest
Per Year
- -------- ------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-.91% Net) (5.09% Net) (11.09% Net) (-.91% Net) (5.09% Net) (11.09% Net)
- -------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1 2,344 150,000 150,000 150,000 1,227 1,326 1,425
2 4,804 150,000 150,000 150,000 2,658 2,939 3,234
3 7,388 150,000 150,000 150,000 4,047 4,606 5,212
4 10,101 150,000 150,000 150,000 5,394 6,325 7,375
5 12,950 150,000 150,000 150,000 6,698 8,098 9,743
6 15,941 150,000 150,000 150,000 7,959 9,928 12,336
7 19,082 150,000 150,000 150,000 9,180 11,820 15,181
8 22,379 150,000 150,000 150,000 10,361 13,776 18,307
9 25,842 150,000 150,000 150,000 11,511 15,810 21,753
10 29,478 150,000 150,000 150,000 12,629 17,922 25,552
11 33,295 150,000 150,000 150,000 13,802 20,232 29,898
12 37,303 150,000 150,000 150,000 14,942 22,639 34,710
13 41,512 150,000 150,000 150,000 16,040 25,141 40,036
14 45,931 150,000 150,000 150,000 17,080 27,727 45,919
15 50,572 150,000 150,000 150,000 18,079 30,418 52,442
16 55,444 150,000 150,000 150,000 18,976 33,165 59,634
17 60,559 150,000 150,000 150,000 19,830 36,028 67,623
18 65,931 150,000 150,000 150,000 20,639 39,010 76,503
19 71,571 150,000 150,000 150,000 21,413 42,129 86,388
20 77,493 150,000 150,000 150,000 22,154 45,396 97,401
Initial Specified Amount: $150,000
Death Benefit Option: Level
- ------------------------------------------------
Cash Surrender Value
Assuming Hypothetical Gross
Annual Investment Return of
- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-.91% Net) (5.09% Net) (11.09% Net)
- ------------- ------------- -------------
0 0 0
147 428 723
1,536 2,095 2,701
2,883 3,814 4,864
4,615 6,015 7,659
6,276 8,245 10,653
7,924 10,564 13,926
9,533 12,948 17,479
11,084 15,382 21,326
12,629 17,922 25,552
13,802 20,232 29,898
14,942 22,639 34,710
16,040 25,141 40,036
17,080 27,727 45,919
18,079 30,418 52,442
18,976 33,165 59,634
19,830 36,028 67,623
20,639 39,010 76,503
21,413 42,129 86,388
22,154 45,396 97,401
<FN>
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
</FN>
- --------------------------------------------------------------------------------
ILLUSTRATIONS - VERSION B
BMA
ADVANTAGE VUL VARIABLE UNIVERSAL LIFE
MALE AGE 45 PREFERRED NON-TOBACCO
PLANNED PREMIUM: $1,980 ASSUMING GUARANTEED CHARGES
- ------------------------------------------------------- ------------------------------------------------------------------- -
PREMIUMS DEATH PROCEEDS ACCUMULATION VALUE
END OF ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
POLICY AT 5% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR INTEREST
PER YEAR
- -------- ------------- ----------------------------------------------- ---------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-0.95%Net) (5.05%Net) (11.05%Net) (-0.95%Net) (5.05%Net) (11.05%Net)
- -------- ------------- ------------- ------------- ------------- ------------- ------------- -----------
1 2,079 150,000 150,000 150,000 1,054 1,140 1,226
2 4,262 150,000 150,000 150,000 2,232 2,476 2,730
3 6,554 150,000 150,000 150,000 3,352 3,829 4,349
4 8,961 150,000 150,000 150,000 4,412 5,200 6,091
5 11,488 150,000 150,000 150,000 5,408 6,582 7,966
6 14,141 150,000 150,000 150,000 6,338 7,976 9,987
7 16,927 150,000 150,000 150,000 7,195 9,372 12,160
8 19,853 150,000 150,000 150,000 7,969 10,763 14,493
9 22,924 150,000 150,000 150,000 8,655 12,139 16,998
10 26,149 150,000 150,000 150,000 9,241 13,491 19,684
11 29,536 150,000 150,000 150,000 9,790 14,901 22,692
12 33,092 150,000 150,000 150,000 10,223 16,277 25,937
13 36,825 150,000 150,000 150,000 10,535 17,612 29,447
14 40,746 150,000 150,000 150,000 10,717 18,896 33,249
15 44,862 150,000 150,000 150,000 10,753 20,113 37,371
16 49,184 150,000 150,000 150,000 10,625 21,245 41,846
17 53,722 150,000 150,000 150,000 10,317 22,272 46,713
18 58,487 150,000 150,000 150,000 9,801 23,168 52,014
19 63,491 150,000 150,000 150,000 9,045 23,898 57,797
20 68,744 150,000 150,000 150,000 8,015 24,427 64,124
INITIAL SPECIFIED AMOUNT: $150,000
DEATH BENEFIT OPTION: LEVEL
- ----------------------------------------------------
CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF
-----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-0.95%Net) (5.05%Net) (11.05%Net)
------------- ------------- -------------
0 0 0
0 1 255
877 1,354 1,874
1,937 2,725 3,616
3,353 4,528 5,912
4,680 6,318 8,329
5,957 8,135 10,922
7,152 9,946 13,676
8,234 11,719 16,577
9,241 13,491 19,684
9,790 14,901 22,692
10,223 16,277 25,937
10,535 17,612 29,447
10,717 18,896 33,249
10,753 20,113 37,371
10,625 21,245 41,846
10,317 22,272 46,713
9,801 23,168 52,014
9,045 23,898 57,797
8,015 24,427 64,124
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
BMA
ADVANTAGE VUL VARIABLE UNIVERSAL LIFE
MALE AGE 45 PREFERRED NON-TOBACCO
PLANNED PREMIUM: $1,980 ASSUMING CURRENT CHARGES
- ------------------------------------------------------- ------------------------------------------------------------------- ----
PREMIUMS DEATH PROCEEDS ACCUMULATION VALUE
END OF ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
POLICY AT 5% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR INTEREST
PER YEAR
- -------- ------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-0.95%Net) (5.05%Net) (11.05%Net) (-0.95%Net) (5.05%Net) (11.05%Net)
- -------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1 2,079 150,000 150,000 150,000 1,078 1,165 1,253
2 4,262 150,000 150,000 150,000 2,360 2,609 2,869
3 6,554 150,000 150,000 150,000 3,600 4,095 4,632
4 8,961 150,000 150,000 150,000 4,801 5,626 6,557
5 11,488 150,000 150,000 150,000 5,962 7,204 8,662
6 14,141 150,000 150,000 150,000 7,084 8,831 10,965
7 16,927 150,000 150,000 150,000 8,166 10,507 13,486
8 19,853 150,000 150,000 150,000 9,206 12,234 16,248
9 22,924 150,000 150,000 150,000 10,203 14,011 19,274
10 26,149 150,000 150,000 150,000 11,153 15,838 22,589
11 29,536 150,000 150,000 150,000 12,131 17,816 26,360
12 33,092 150,000 150,000 150,000 13,058 19,853 30,512
13 36,825 150,000 150,000 150,000 13,925 21,945 35,082
14 40,746 150,000 150,000 150,000 14,736 24,100 40,123
15 44,862 150,000 150,000 150,000 15,486 26,315 45,686
16 49,184 150,000 150,000 150,000 16,110 28,535 51,783
17 53,722 150,000 150,000 150,000 16,665 30,814 58,527
18 58,487 150,000 150,000 150,000 17,155 33,161 66,004
19 63,491 150,000 150,000 150,000 17,572 35,575 74,300
20 68,744 150,000 150,000 150,000 17,915 38,059 83,516
INITIAL SPECIFIED AMOUNT: $150,000
DEATH BENEFIT OPTION: LEVEL
- --------------------------------------------------
CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF
-----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-0.95%Net) (5.05%Net) (11.05%Net)
------------- ------------- -------------
0 0 0
0 134 394
1,125 1,620 2,157
2,326 3,151 4,082
3,908 5,149 6,607
5,426 7,172 9,307
6,929 9,269 12,249
8,390 11,417 15,431
9,783 13,591 18,853
11,153 15,838 22,589
12,131 17,816 26,360
13,058 19,853 30,512
13,925 21,945 35,082
14,736 24,100 40,123
15,486 26,315 45,686
16,110 28,535 51,783
16,665 30,814 58,527
17,155 33,161 66,004
17,572 35,575 74,300
17,915 38,059 83,516
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
BMA
ADVANTAGE VUL VARIABLE UNIVERSAL LIFE
MALE AGE 55 PREFERRED NON-TOBACCO
PLANNED PREMIUM: $3,654 ASSUMING GUARANTEED CHARGES
- ------------------------------------------------------- ------------------------------------------------------------------- -----
PREMIUMS DEATH PROCEEDS ACCUMULATION VALUE
END OF ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
POLICY AT 5% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR INTEREST
PER YEAR
- -------- ------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-0.95%Net) (5.05%Net) (11.05%Net) (-0.95%Net) (5.05%Net) (11.05%Net)
- -------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1 3,837 150,000 150,000 150,000 1,955 2,114 2,275
2 7,865 150,000 150,000 150,000 3,953 4,399 4,867
3 12,095 150,000 150,000 150,000 5,809 6,675 7,617
4 16,537 150,000 150,000 150,000 7,520 8,934 10,539
5 21,200 150,000 150,000 150,000 9,071 11,163 13,639
6 26,097 150,000 150,000 150,000 10,451 13,348 16,927
7 31,238 150,000 150,000 150,000 11,644 15,473 20,416
8 36,637 150,000 150,000 150,000 12,631 17,518 24,114
9 42,306 150,000 150,000 150,000 13,385 19,453 28,031
10 48,258 150,000 150,000 150,000 13,879 21,250 32,177
11 54,507 150,000 150,000 150,000 14,205 23,036 36,789
12 61,069 150,000 150,000 150,000 14,223 24,649 41,732
13 67,959 150,000 150,000 150,000 13,905 26,058 47,051
14 75,194 150,000 150,000 150,000 13,217 27,232 52,807
15 82,790 150,000 150,000 150,000 12,117 28,127 59,068
16 90,767 150,000 150,000 150,000 10,537 28,678 65,911
17 99,142 150,000 150,000 150,000 8,306 28,727 73,376
18 107,936 150,000 150,000 150,000 5,476 28,308 81,680
19 117,169 150,000 150,000 150,000 1,820 27,214 90,931
20 126,864 0 150,000 150,000 0 25,282 101,349
INITIAL SPECIFIED AMOUNT: $150,000
DEATH BENEFIT OPTION: LEVEL
- --------------------------------------------------
CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF
-----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-0.95%Net) (5.05%Net) (11.05%Net)
------------- ------------- -------------
0 0 0
299 745 1,213
2,155 3,021 3,963
3,866 5,280 6,885
6,038 8,130 10,606
8,002 10,899 14,479
9,817 13,646 18,589
11,425 16,312 22,909
12,764 18,832 27,409
13,879 21,250 32,177
14,205 23,036 36,789
14,223 24,649 41,732
13,905 26,058 47,051
13,217 27,232 52,807
12,117 28,127 59,068
10,537 28,678 65,911
8,306 28,727 73,376
5,476 28,308 81,680
1,820 27,214 90,931
0 25,282 101,349
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
BMA
ADVANTAGE VUL VARIABLE UNIVERSAL LIFE
MALE AGE 55 PREFERRED NON-TOBACCO
PLANNED PREMIUM: $3,654 ASSUMING CURRENT CHARGES
- ------------------------------------------------------- ------------------------------------------------------------------- ----
PREMIUMS DEATH PROCEEDS ACCUMULATION VALUE
END OF ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
POLICY AT 5% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR INTEREST
PER YEAR
- -------- ------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-0.95%Net) (5.05%Net) (11.05%Net) (-0.95%Net) (5.05%Net) (11.05%Net)
- -------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1 3,837 150,000 150,000 150,000 2,261 2,431 2,601
2 7,865 150,000 150,000 150,000 4,673 5,161 5,670
3 12,095 150,000 150,000 150,000 6,995 7,960 9,008
4 16,537 150,000 150,000 150,000 9,226 10,829 12,641
5 21,200 150,000 150,000 150,000 11,363 13,768 16,598
6 26,097 150,000 150,000 150,000 13,407 16,782 20,918
7 31,238 150,000 150,000 150,000 15,352 19,868 25,636
8 36,637 150,000 150,000 150,000 17,197 23,031 30,799
9 42,306 150,000 150,000 150,000 18,932 26,264 36,453
10 48,258 150,000 150,000 150,000 20,546 29,564 42,646
11 54,507 150,000 150,000 150,000 22,157 33,102 49,689
12 61,069 150,000 150,000 150,000 23,655 36,745 57,484
13 67,959 150,000 150,000 150,000 25,037 40,502 66,133
14 75,194 150,000 150,000 150,000 26,302 44,383 75,754
15 82,790 150,000 150,000 150,000 27,429 48,383 86,473
16 90,767 150,000 150,000 150,000 28,110 52,260 98,298
17 99,142 150,000 150,000 150,000 28,595 56,235 111,561
18 107,936 150,000 150,000 150,000 28,917 60,355 126,505
19 117,169 150,000 150,000 156,271 29,061 64,631 143,368
20 126,864 150,000 150,000 173,461 28,988 69,061 162,114
INITIAL SPECIFIED AMOUNT: $150,000
DEATH BENEFIT OPTION: LEVEL
- -------------------------------------------------
CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF
-----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-0.95%Net) (5.05%Net) (11.05%Net)
------------- ------------- -------------
0 0 0
1,019 1,507 2,016
3,341 4,306 5,354
5,572 7,175 8,987
8,330 10,735 13,565
10,959 14,334 18,470
13,525 18,041 23,809
15,991 21,825 29,594
18,311 25,643 35,832
20,546 29,564 42,646
22,157 33,102 49,689
23,655 36,745 57,484
25,037 40,502 66,133
26,302 44,383 75,754
27,429 48,383 86,473
28,110 52,260 98,298
28,595 56,235 111,561
28,917 60,355 126,505
29,061 64,631 143,368
28,988 69,061 162,114
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
BMA
ADVANTAGE VUL VARIABLE UNIVERSAL LIFE
FEMALE AGE 50 PREFERRED NON-TOBACCO
PLANNED PREMIUM: $2,232 ASSUMING GUARANTEED CHARGES
- ------------------------------------------------------- ------------------------------------------------------------------- -----
PREMIUMS DEATH PROCEEDS ACCUMULATION VALUE
END OF ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
POLICY AT 5% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR INTEREST
PER YEAR
- -------- ------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-0.95%Net) (5.05%Net) (11.05%Net) (-0.95%Net) (5.05%Net) (11.05%Net)
- -------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1 2,344 150,000 150,000 150,000 1,161 1,257 1,353
2 4,804 150,000 150,000 150,000 2,439 2,710 2,993
3 7,388 150,000 150,000 150,000 3,651 4,179 4,754
4 10,101 150,000 150,000 150,000 4,788 5,657 6,641
5 12,950 150,000 150,000 150,000 5,851 7,143 8,668
6 15,941 150,000 150,000 150,000 6,838 8,636 10,847
7 19,082 150,000 150,000 150,000 7,749 10,136 13,197
8 22,379 150,000 150,000 150,000 8,586 11,644 15,737
9 25,842 150,000 150,000 150,000 9,353 13,165 18,493
10 29,478 150,000 150,000 150,000 10,046 14,696 21,488
11 33,295 150,000 150,000 150,000 10,736 16,333 24,880
12 37,303 150,000 150,000 150,000 11,332 17,971 28,579
13 41,512 150,000 150,000 150,000 11,814 19,591 32,605
14 45,931 150,000 150,000 150,000 12,152 21,165 36,977
15 50,572 150,000 150,000 150,000 12,321 22,671 41,724
16 55,444 150,000 150,000 150,000 12,309 24,093 46,892
17 60,559 150,000 150,000 150,000 12,102 25,418 52,535
18 65,931 150,000 150,000 150,000 11,695 26,641 58,726
19 71,571 150,000 150,000 150,000 11,084 27,758 65,553
20 77,493 150,000 150,000 150,000 10,254 28,752 73,108
INITIAL SPECIFIED AMOUNT: $150,000
DEATH BENEFIT OPTION: LEVEL
- --------------------------------------------------
CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF
-----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-0.95%Net) (5.05%Net) (11.05%Net)
------------- ------------- -------------
0 0 0
0 199 482
1,140 1,668 2,243
2,277 3,146 4,130
3,767 5,059 6,584
5,156 6,954 9,165
6,494 8,880 11,941
7,757 10,815 14,908
8,926 12,738 18,066
10,046 14,696 21,488
10,736 16,333 24,880
11,332 17,971 28,579
11,814 19,591 32,605
12,152 21,165 36,977
12,321 22,671 41,724
12,309 24,093 46,892
12,102 25,418 52,535
11,695 26,641 58,726
11,084 27,758 65,553
10,254 28,752 73,108
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
BMA
ADVANTAGE VUL VARIABLE UNIVERSAL LIFE
FEMALE AGE 50 PREFERRED NON-TOBACCO
PLANNED PREMIUM: $2,232 ASSUMING CURRENT CHARGES
- ------------------------------------------------------- ------------------------------------------------------------------- ---
PREMIUMS DEATH PROCEEDS ACCUMULATION VALUE
END OF ACCUMULATED ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
POLICY AT 5% ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR INTEREST
PER YEAR
- -------- ------------- ----------------------------------------------- -----------------------------------------------
0 % Gross 6 % Gross 12% Gross 0 % Gross 6 % Gross 12% Gross
(-0.95%Net) (5.05%Net) (11.05%Net) (-0.95%Net) (5.05%Net) (11.05%Net)
- -------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1 2,344 150,000 150,000 150,000 1,227 1,325 1,424
2 4,804 150,000 150,000 150,000 2,656 2,937 3,232
3 7,388 150,000 150,000 150,000 4,044 4,602 5,208
4 10,101 150,000 150,000 150,000 5,388 6,318 7,368
5 12,950 150,000 150,000 150,000 6,689 8,088 9,731
6 15,941 150,000 150,000 150,000 7,947 9,913 12,318
7 19,082 150,000 150,000 150,000 9,164 11,799 15,155
8 22,379 150,000 150,000 150,000 10,341 13,749 18,272
9 25,842 150,000 150,000 150,000 11,486 15,775 21,705
10 29,478 150,000 150,000 150,000 12,599 17,878 25,489
11 33,295 150,000 150,000 150,000 13,767 20,178 29,817
12 37,303 150,000 150,000 150,000 14,900 22,573 34,608
13 41,512 150,000 150,000 150,000 15,992 25,062 39,906
14 45,931 150,000 150,000 150,000 17,025 27,633 45,758
15 50,572 150,000 150,000 150,000 18,016 30,307 52,243
16 55,444 150,000 150,000 150,000 18,905 33,035 59,390
17 60,559 150,000 150,000 150,000 19,752 35,876 67,326
18 65,931 150,000 150,000 150,000 20,552 38,834 76,143
19 71,571 150,000 150,000 150,000 21,317 41,927 85,955
20 77,493 150,000 150,000 150,000 22,050 45,164 96,881
INITIAL SPECIFIED AMOUNT: $150,000
DEATH BENEFIT OPTION: LEVEL
- --------------------------------------------------
CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF
-----------------------------------------------
0 % Gross 6 % Gross 12% Gross
(-0.95%Net) (5.05%Net) (11.05%Net)
------------- ------------- -------------
0 0 0
145 426 721
1,533 2,091 2,697
2,877 3,807 4,857
4,605 6,004 7,646
6,265 8,231 10,635
7,908 10,544 13,900
9,512 12,921 17,443
11,059 15,348 21,278
12,599 17,878 25,489
13,767 20,178 29,817
14,900 22,573 34,608
15,992 25,062 39,906
17,025 27,633 45,758
18,016 30,307 52,243
18,905 33,035 59,390
19,752 35,876 67,326
20,552 38,834 76,143
21,317 41,927 85,955
22,050 45,164 96,881
The hypothetical investment rates of return shown in this illustration are for
illustrative purposes only and should not be deemed a representation of past or
future investment rates of return. Actual rates of return may be more or less
than those shown and will depend on a number of factors including the investment
performance of the subaccounts selected by the policyowner.
The Death Proceeds, Accumulation Value and Cash Surrender Value for a policy
would differ from those shown in this illustration if the actual gross annual
rates of return averaged 0.00%, 6.00% and 12.00% over a period of years, but
also fluctuated above or below those averages for individual policy years. The
Death Proceeds, Accumulation Value and Cash Surrender Value would also be
different if any policy loans or partial surrenders were made.
No representation can be made by BMA, the separate account or the underlying
portfolios that these hypothetical rates of return can be achieved for any one
year or sustained over a period of time.
PART II
UNDERTAKING TO FILE REPORTS
a. Subject to the terms and conditions of Section 15(d) of the Securities and
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority confined in that section.
b. Pursuant to Investment Company Act Section 26(e), Business Men's Assurance
Company of America ("Company") hereby represents that the fees and charges
deducted under the Policy described in the Prospectus, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by the Company.
INDEMNIFICATION
The Bylaws of the Company (Article IV) provide that:
Section 1: Indemnification. Each person who is or was a Director, officer or
employee of the Corporation or is or was serving at the request of the
Corporation as a Director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise (including the heirs,
executors, administrators or estate of such person) shall be indemnified by the
Corporation as a right to the full extent permitted or authorized by the laws of
the State of Missouri, as now in effect and as hereafter amended, against any
liability, judgment, fine, amount paid in settlement, cost and expense
(including attorneys' fees) asserted or threatened against and incurred by such
person in his capacity as or arising out of his status as a Director, officer or
employee of the Corporation, or if serving at the request of the Corporation, as
a Director, officer or employee of another corporation, partnership, joint
venture, trust or other enterprise. The indemnification provided by this Bylaw
provision shall not be exclusive of any other rights to which those indemnified
may be entitled under any other bylaw or under any agreement, vote of
shareholders or disinterested directors or otherwise, and shall not limit in any
way any right which the Corporation may have to make different or further
indemnifications with respect to the same or different persons or classes of
persons.
Without limiting the foregoing, the Corporation is authorized to enter into an
agreement with any Director, officer or employee of the Corporation providing
indemnification for such person against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement that result from any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, including any action by or in the right of the
Corporation, that arises by reason of the fact that such person is or was a
Director, officer or employee of the Corporation, or is or was serving at the
request of the Corporation as a Director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, to the full
extent allowed by law, whether or not such indemnification would otherwise be
provided for in this Bylaw, except that no such agreement shall indemnify any
person from or on account of such person's conduct which was finally adjudged to
have been knowingly fraudulent, deliberately dishonest or willful misconduct.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted for directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
CONTENTS OF REGISTRATION STATEMENT
The Registration Statement comprises the papers and documents:
The facing sheet
The Prospectus consisting of 131 pages.
Undertakings to file reports.
The signatures.
Written consents of the following persons: Consent of Actuary
The following exhibits.
A. Copies of all exhibits required by paragraph A of instructions for
Exhibits in Form N-8B-2.
1. Resolution of the Board of Directors of the Company*
2. Not Applicable
3.a. Form of Co-Principal Underwriters' Agreement
3.b. Form of Selling Agreements
3.c. Schedule of Commissions
4. Not Applicable
5. Flexible Premium Adjustable Variable Life Insurance Policy*
6.a. Articles of Incorporation of the Company*
6.b. Bylaws of the Company*
7. Not Applicable
8. Form of Fund Participation Agreements
9. Form of Reinsurance Agreement
10. Application Form
11. Powers of Attorney*
B. Opinion and Consent of Counsel
C. Consent of Actuary
D. Consent of Independent Auditors
*Incorporated by reference to Form S-6 (File No. 333-52689) electronically
filed on May 14, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned thereunto duly authorized in the City of Kansas City and State of
Missouri on this 10th day of August, 1998.
BMA VARIABLE LIFE ACCOUNT A
Registrant
By: BUSINESS MEN'S ASSURANCE
COMPANY OF AMERICA
By: /s/ DAVID A. GATES
------------------------------
BUSINESS MEN'S ASSURANCE
COMPANY OF AMERICA
By: /S/ MICHAEL K. DEARDORFF
----------------------------
Attest:
/S/ VERNON W. VOORHEES II
- ----------------------------
(Name)
SENIOR VICE PRESIDENT & SECRETARY
- ----------------------------
Title
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
Giorgio Balzer* Director, Chairman of the Board 8/10/98
- ------------------------- -------
Giorgio Balzer and Chief Executive Officer Date
Thomas Morton Bloch* Director 8/10/98
- ------------------------- -------
Thomas Morton Bloch Date
Gianguido Castagno* Director 8/10/98
- ------------------------- -------
Gianguido Castagno Date
William Thomas Grant II * Director 8/10/98
- ------------------------- -------
William Thomas Grant II Date
Donald Joyce Hall, Jr.* Director 8/10/98
- ------------------------- -------
Donald Joyce Hall, Jr. Date
Allan Drue Jennings* Director 8/10/98
- ------------------------- -------
Allan Drue Jennings Date
David Woods Kemper* Director 8/10/98
- ------------------------- -------
David Woods Kemper Date
Giorgio Liveris* Director 8/10/98
- ------------------------- -------
Giorgio Liveris Date
John Kessander Lundberg* Director 8/10/98
- ------------------------- -------
John Kessander Lundberg Date
John Pierre Mascotte* Director 8/10/98
- ------------------------- -------
John Pierre Mascotte Date
Giovanni Perissinotto* Director 8/10/98
- ------------------------- -------
Giovanni Perissinotto Date
/S/ ROBERT T. RAKICH* Director, President and Chief 8/10/98
- ------------------------- -------
Robert Thomas Rakich Operating Officer Date
/S/ VERNON W. VOORHEES II Director, Senior Vice President - 8/10/98
- --------------------------- -------
Vernon Wirt Voorhees II Corporate Services & Secretary Date
/S/ DAVID L. HIGHLEY Senior Vice President & Chief 8/10/98
- ------------------------- -------
David Lee Higley Financial Officer Date
/S/ SUSAN A. SWEENEY Vice President - Treasurer & 8/13/98
- ------------------------- -------
Susan Annette Sweeney Controller Date
*By: /S/ VERNON W. VOORHEES II
--------------------
Attorney-in-Fact
*By: /S/ ROBERT T. RAKICH
--------------------
Attorney-in-Fact
INDEX TO EXHIBITS
EX-99.A.3.a. Form of Co-Principal Underwriters' Agreement
EX-99.A.3.b. Form of Selling Agreements
EX-99.A.3.c. Schedule of Commissions
EX-99.A.8. Form of Fund Participation Agreements
EX-99.A.9. Form of Reinsurance Agreement
EX-99.A.10. Application Form
EX-99.B. Opinion and Consent of Counsel
EX-99.C. Consent of Actuary
EX-99.D. Consent of Independent Auditors